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Get off to a good start when you’re ready to sell your business by putting these three things in place as early as possible.
I know you’re thinking about how much you’ll get. You might even be working on the project that you want to start after the sale, whether that’s your next venture, a long vacation or retirement.
Bear with me though, it will be worth it.
While these are key elements of a successful sale, they are for you not necessarily for sharing. That means the format and formality can be whatever you need them to be.
Let’s get started:
Explain why you’re selling.
Establish your timeline.
Get your business ready to sell.
Contact
stephen.krausse@b50p.com
https://beyond50percent.com
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Twitter | https://twitter.com/beyond50percent
Check out my show on Twitch | https://www.twitch.tv/beyond50percent
Businesses are bought and sold based on the perception of future value.
Business owners are often experts in fields outside of business.
We developed Business BeyonDIY to help you cross that chasm.
Show Topics:
Buying a Business
Selling Your Business
Preparing Your Business for Sale
Practical | Actionable | Sustainable
Business owners and entrepreneurs are go-getters. We start things other people don't (sometimes too many things am I right?) and we push through hard times. That means that entrepreneurship involves a lot of DIY.
Some of the most important transactions we make are buying a business; preparing a business for sale and selling a business. We'll almost always want/need help to make these successful but there is still a lot we'll need to do ourselves.
Business BeyonDIY is a Livestream/podcast where we own our DIY nature but find that sweet spot where doing it yourself doesn't mean going it alone.
In this introductory episode, I'll let you know the format of the show, what to expect, and when I'll be live.
I'm looking forward to getting to know you and your business and sharing practical tips that will make your DIY more like DI-Us!
Stephen Krausse
get off to a great start when you're getting ready to sell your business. By putting these three things into place as early as possible, I know you're probably thinking about how much you're going to get or how fast you can sell. You might even be working on the next thing that you're going after whatever comes next after the current business, whether that's your next venture a long vacation or retirement, but bear with me though, it's going to be worth it. While some of these key elements of a successful while these are key elements of a successful sale, they are not necessarily for sharing with other people. So these are things you can keep to yourself. But will you can put them in place to really help drive your business forward. And I guess the advantage there is that what that means is that it doesn't have to be formal, necessarily. And you can use whatever mechanisms work for you. To make these things happen. Those three things that we're going to talk about today are explain why you're selling. Establish your timeline, and get your business ready to sell. It Hi business owners and entrepreneurs. My name is Stephen Krausse E and welcome to Business beyond DIY, where we get you from where you are to what comes next. I'm in business by education, trade and passion. And I want to help you increase the value of your entrepreneurial journey. The business beyond DIY live stream and podcast is about understanding and developing the value of a business, your business. Well, let's get started. Okay, so you might be if you saw previous episodes or anything. You'll notice that this is a potentially a repeat of last the last episode. That episode has been unlisted on YouTube and isn't showing up. There is the like the link is live. So if you do have the link, you can listen to it. The introduction didn't go well, because I didn't have my mic on. And there were some problems, technical problems that I had. So I just wanted to touch on that if you did see that episode, this is going to be covering the same topic. I've had another week to think about it, I guess, so that I might throw in something that I didn't do last time, or I might forget something that I did do last time and who knows. But I just wanted to share that. Part of it is because you know this, this journey of being an entrepreneur and a small business owner, is a lot of times it's about messing up. You know, and I do this show live. So, you know, and I don't have an audience, I don't have anybody to tell me, Hey, we can't hear the audio. You know, if there's somebody watching it live, then yeah, but a lot of times, it's just, you know, there's there's no way to know what the experience has been until after the show when I go to do the post processing and upload. Or I look at the video and do all of you, whatever editing I need to do. So. And I guess what I want to do is say it's okay. You know, if something happens, and your show doesn't go well or something happens in your process doesn't go? Well. It doesn't matter what part of your business you're talking about. There's always stuff that goes wrong. So I just want you to say that's okay. Don't be afraid to do something new, because you're worried that you might break it. You know, I, I break stuff all the time in in my media production. I'm literally going through how am I going to use tick tock for my business? I have no idea what I'm doing with tick tock, and I'm not going to let that stop me. Does that mean it's gonna work out? Great at first? Probably not. But if I don't do it, I will never figure it out. So I just want to share that. This is an adventure. One of the things I talked about on my other stream on Twitch a few weeks ago was that there are no answers. There are no solutions in business. And anybody who tells you they're selling you a solution in business is pretty much selling you something that doesn't exist. What we have in business is the next best experiment that you can try.
And that's okay. And as an entrepreneur, we can normalize that and say, okay, that it's not about finding the right answer. It's about finding the next best experiment. Okay, so there's a playlist on my on my YouTube channel that talks about that. It's it's the business whiteboarding workshop playlist. And if you're interested in that, you can go check that out. What I wanted to talk about today though, As these three things we can do to really prep our business for sale. The first one, like I said, Why are you selling, the second one is establishing a timeline. And the third one is prepping the business itself. And so let's talk about each of those things. At the step by step, a little format change that I'm going to do is, you know, if you've listened to past episodes, you'll notice that I kind of have I go through the topic, and then I, I, I talk about how to make it practical, how to make it actionable, and how to make it sustainable. At the end of the, of the show, I've changed that up a little bit with the show notes, and we'll see how it works. I'm trying to integrate that practicality, the actionable portion and the and the sustainability right into kind of the top of the the meat of the program. We'll see how it works. It's an experiment. And I felt like it might flow a little bit better. And we'll try it. So according to Viking, mergers calm, there are three reasons that business owners will sell. One is burnout, or what they call burnout. The second is that it's time to do something different. And the third is retirement. And, yeah, okay, so let's, let's talk a little bit about that burnout, you know, you do the same thing long enough, maybe you get tired of it. And I think one of the things that's important is to realize that, that's okay. You know, it's perfectly okay for you to run a business for a certain amount of time and realize either A, I don't love this anymore, or B, I never loved this to begin with. Or see, this is way too much work for the value I'm getting back. It's a return on investment issue. If you're working 80 hours a week, and making $45,000 a year, you can go do that for someone else, make more money and have more time off. You know, maybe it's not the best choice to stay, to continue running that business. Or if you've been doing for example, in 1987, my dad and a few other partners started directed energy, I was very young at that point, I was in my late teens. And I was there and I helped by virtue of the fact that I was the only one who had taken art. Well, that's not I was gonna say I was the only one that had taken accounting. That's not true. I had taken accounting, which qualified me to do some of the work. And so, you know, I sold that company, while we sold it first in 2000. I bought it back in 2018. And I sold it again in 2021. But it basically worked in the business, even after we sold it in 2000, I worked in it for another as the as the General Manager as the local owner, operator. From you know, 1987 to 1989. When I joined the service, then I came back in 1995. And from 1995 until 2021. I ran the same business. Okay. I I was working for or ran the same business. When I sold it in 2021. I was happy to be done. I wouldn't say I was burned out necessarily. But that's a long time to do the same thing in the same industry. And so I was okay saying okay, I'm I'm want to move on to other things.
And I think it's important to, as an owner, just say that life is fluid. And you don't have to do the same thing forever. So those are the three things that they were talking about burnout, time to do something different. And retirement, which I would actually argue is basically all under the category of time to do something different. If you're burned out, it's time to do something different. If you're retiring, it's time to do something different. And if it's time to do something different, self explanatory. I would add a couple of things to this. One is a change in circumstances in your life. And yes, you could make that a time to do something different category as well. But I think it's worth mentioning independently because it's important. When we start a business our life is a certain way We have certain obligations, whatever that environment looks like for you, that's how you started your business, your life could change such that it's not conducive to that any more. And I think it's important to say, It's okay to say, this happened in my life, and I can't put this kind of effort into my business now, or this opportunity unfolded. And I can take it, do something different with my business, and go on to something different, something new, that's okay, a change in your life circumstance may change how appropriate it is for you to own or operate a specific business. And that's cool, that's totally fine. The other one I want to touch on and this is really important, from the perspective of, of business ownership, and, and going out of business, and that is a declining business. So if you're selling, excuse me, if you're, if you have a business that is in decline, and we don't like to admit it, you don't have to admit it to me. But you, you know, if your business is in decline, whether that's revenue decline that has been significant, or you can see the writing on the wall, that your business is not going to be irrelevant in the way that you are currently running it in a number of years, it might be time to offer it up to someone who can take the the core of what your business is, and make something out of it that will be relevant in that timeframe. So and that that doesn't say anything, I think it's really important to understand that when we are not the right person to move a business forward, that is not a negative thing about you as an owner, your qualifications, how hard you've worked, your good ideas, none of that is in play. It is okay not to be the one who can take your business to the next place. And sometimes that means we hire somebody who to run the business. And you see that happening in a lot of companies where the founder will start. You know, a lot of times in technology, someone will invent something cool. But they're not the right person to move the business going forward. And there are some businesses in technology where the founder won't stop. And you can see the decline of the business, because the founder won't let go. And so okay, that's kind of a rant for another, another episode, maybe if it's relevant. But the point is, I've spent a lot of time talking about why you might get rid of a business, why you might sell a business? Why do you need to be able to talk about it, that's what we're really talking about here. And the issue is that it's going to come up, when you go to sell. When someone says, I want to offer this business up for sale, I guarantee, if I'm on the side of the on the side, that's if I'm working for the buyer, I guarantee you, we are going to ask you, what is prompting you to sell your business. And it matters because we want to understand the landscape, in case we're trying to buy a dumpster fire. And look, that's part of the problem or part of the situation. So
we're going to ask you that. And we need to be able to as sellers, we need to be able to articulate why we're selling a business in an authentic way. And that doesn't mean and I want to be very clear about this. And I said this last time. We don't ever, ever misrepresent what we're selling. And we don't try to gloss over the things that are going wrong with our business. What we do want to do in this case and this piece of the puzzle and this is a small piece is be able to articulate why we are trying to get value out of our business at this time and move on to something different. So what does that look like for you do and as you can imagine? This takes some thinking? Because if you say, it's just time for me to move on, that is basically code for I'm not talking about it. I don't, I haven't thought about it. Which is weird, because why would you be selling a business if you haven't thought about it, but I'm not ready to share that information. So if you say, I'm just ready to sell. That's a, that's an answer that simply prompts more questions. And so if you think about this in advance, and you articulate or you create a statement, and we're not talking about a script here, I mean, you can write it down exactly like you want to say it or whatever. But it needs to be the authentic truth. And phrased in a way that the buyer can understand and say and make a connection with, say, Oh, I get that I can, I can understand why you would want to move on from this at this time in your life, if it's a change in circumstance in your life, you share what you're willing to share, if you have a very sick relative that you need to take care of, you don't have to tell them all the details about what's wrong with your relative. But if it's a significant reason why you're selling your business, you might consider saying, you know, I have a sick parent, and I need to spend more time with them or a sick spouse, and I need to spend more time with them or a sick child, whatever it may be, you may be sick. And you may need to say, you know, I I'm, you know, I'm sick, and I can't spend the kind of time and energy on the business that I would like or that it deserves whatever. You don't have to share more than you're willing. But if you can give the buyer a connection point, so that they can understand the rationale, you're going to find that they will be able to
connect with you in a way that that humanizes the situation. Because at the end of the day, business, we'll talk about valuation on a different podcast, but there are formulas that get you into the ballpark of valuation. They just based on the kind of business that you're going to sell and and the value of that business. What changes, the final number is how the buyer perceives the future value of the business. And that perception comes from every interaction they have from you, or with you as the seller. So being able to articulate, you know, why am I going to sell this business, you know, start a Google doc start a Word document. And you know, these first two topics, you can put on a simple word document, or a Google Doc or whatever. It can be written down, you can use handwritten notes. The nice thing about digital documents, of course, is that they're easy to update. And they can you don't have to have that particular notebook with you at a given time if you have an idea or whatever. So but you need to use a tool that works for you. And that's something that I always talk about is use the tools that work for you, not the tools that someone tells you, or tells you that you should be using. Forget that you use tools that work for you. So just write it down. You can start with just brainstorming Why don't you want to or it's gonna say why don't you want to be doing your business anymore. That's, that assumes that that you're burnt out, but what conditions exist, that you want to sell your business. If you're not immediately thinking about selling your business, then you're in the best position ever to create a strategic plan around your exit. So that in 10 years when you are ready to sell, you are planning on selling. And that's the ideal, right is to have an exit strategy where you can say I'm going to build this business up to a certain level. And that's my exit point. That's when I'm ready to go. And so the the action step there is simply to use the documentation system that works for you write it down and keep it up to date. You know, if you're not ready to sell today, say okay, I'm not ready to sell today but what are the crisis? material that I'm going to want to have met when I go to sell my business, alright. So and then when it comes to sustaining that document, obviously you just keep it around update it, when it when it when your feelings around it change or when the conditions on the ground change. The next thing I talked about is establishing your timeline. Now the first thing that what I was just talking about is if you have that long time frame, then you can plan a strategic exit. And if you have a shorter time frame, do you have a less strategic exit, and if you've Are you familiar with the Quality Triangle, and and if you if you are or if you're not, you can get two out of three of these things speed, price and quality. So if you want something at high quality, generally speaking, you're going to compromise speed, and price. And all three of those things apply. So you go through and you can have price and quality, if you compromise speed. And go through all of those things, you know what combinations you might have, I have a timeline triangle that I use for selling a business or for the timeline of selling a business and its speed and price and the quality of terms. And you basically get two out of three, if you want to sell something fast, and you want a specific price, assuming that evaluation might be there, you're going to compromise the quality of the terms of the deal. If you want to sell fast, if you don't care how fast you sell, then you can get a price and the quality of terms that you want. And again, you go through which combination you have, the best thing in the world is to be focused on the value of your business, have a strategic plan for the long term exit strategy that you want to execute, and be working towards that the day you get your EIN number, right to say, Okay,
this is my business, this is what I'm going to do. And this is how I'm going to exit. And that and this is what's going to be valuable to my buyer. Okay, so you know, and going back to the whole, when you get your EIN number, ideally, literally, when you start your business, it that would be the best time to start thinking about your exit, what am I going to do to move on. Barring that, I tell people 10 years, give yourself a 10 year time frame, to say I want to exit when I'm x age, or 10 years from now, whatever that means. That allows you to put in place the things that you will need to get the price you want. And the quality of terms that you want. Because you're you don't have to worry about selling right away. That puts you in the best position to get the most value. So putting that timeline together. Again, you just add this from a practical standpoint to your to the document that you use to explain why you're going to sell. And you just keep those things in your mind. As you do your day to day work. Maybe you keep them on. Maybe when you're coming to work on Monday morning, you say what action do I need to take? For these things? Maybe nothing, maybe just read them? So that you say oh, yeah, I need to remember that. Maybe it's once a month when you review your financials with your CPA, or once a quarter even go through those documents, make sure they're still accurate. Are we on track to hit our target for our timeline is my exit reason my rationale for exiting, still applicable to my current situation. That's all that's all you need to do. It is not as long as you're not doing this in a rush. There's no rush. And you can just ease it into your operation or your the the the reviews that you do on a regular basis. So finally, getting it ready to to sell now this is you know I have a product called Run it ready to exit. I'm not trying to sell that today and but but there's a reason I have that product. And that is because we need to understand and focus on the transfer ability of the value of your business. And what that looks like for each business is different. But we need to think in terms of designing, building and updating the business around transferability. And what I mean by that is transferring the value from the current owner to a prospective owner to a buyer. And they need to see that the more they your buyer can see themselves transferring and continuing to build value with your business, the more valuable your business is going to appear to them. So one of the first things that you need to think about, is getting yourself out of the day to day operations. And as business owners and entrepreneurs, that doesn't come easy all the time. But that's one of the first things to do. And the way we do that is by documenting what we do and getting well, and I'll talk about that in just a minute, but getting yourself out of the operation, then what makes your business special and unique. document that. And what and I know the document word makes a lot of entrepreneurs and small business owners nervous or roll their eyes, because we don't want to document it doesn't feel
very entrepreneurial. But the reality is, it's really important. Because if you can't document what makes you special, you can't articulate it. And if you can't articulate it, then what makes someone want to buy it. And since that's what we're talking about, being able to document, prioritize and protect what makes your business unique and special, directly impacts the value of that business to other people. So what's the practical point of getting something ready to exit? So I don't want to exit for 10 years? Why do I care about getting it ready? today? Well, a good run business, a well run business is better for the owner to begin with. They'll have higher profits, better cash position, lower risk. And if you're if you have a system in place of documentation, it's easier to train employees, new employees don't take as long to be up to speed and, and adding value. All of those things are better for you to begin with. So, you know, that's it, it is absolutely practical, to be ready to sell your business at any given time. The next thing is, you know, how do we do that. And and when we talk about documentation, again, I go back to this does not have to be a three ring binder that sits by your desk where every time you do something, you have to look up the process. Okay, what matters is what makes your business unique and special? And how do you deliver that? And how do you share that with your co workers, with your vendors, with your customers? And how do you remember on a day to day basis? And you know, who knows, for a chef, it might be recipes. For a carpenter, it might be jigs, and it just depends for for a service provider it might be how do you interact with your contact list, your customer list? All of those things. Make or in the case of a service provider? How do you provide your service that differentiates you from competitors, or other alternatives? Write that down and and keep it around and obviously update it. So the first thing and again it goes back to when I say write it down. What I mean is document in a way that's authentic and use it authentic and useful to you. As a business owner. We don't care what you know what the format looks like. I would make the argument you don't want to use a whiteboard to document your most critical processes. But, you know, that's one extreme versus, you know, do you have a documentation system that you that is database driven that you pay for, I'm not going to be an advocate of that either. Unless that's what you need, unless that's what works for you. So don't make documentation the enemy, make it the thing that's going to help you transfer the value of your business to a buyer when you're ready to sell. And then it's your ally, not your adversary. Train your employees. Right? How do they how can they deliver what makes you and your business special, then you have to delegate, empower, and trust them to do it. And the more you do that, the more you delegate, the more you empower your employees, and the more you trust them, the faster they will make mistakes, which is good, because then you can set find gaps in what you're telling them, or what you've written down and articulate it more clearly. So that they can achieve the goals that you need them to. So
and then how do you sustain the that piece of it? Well, like we talked about, you document it, and you keep your documentation up to up to date, based on what you're doing at that time, and businesses evolve. And that's part of the process. So and we keep that document, we keep the documentation that we need, where we need it when we need it. One of the things, you know, I talked about a carpenter might use jigs, you know, as as part of their process, your jig could literally be a very important part of your documentation. And so don't think of documentation as the written word, necessarily, you might need to provide some written words around the use of that jig or fixture. But that could be a huge piece of it. And, and so when when we talk about documenting the processes that make you special, that I I'm all in on it being practical and useful, and not extra work. I am not a big fan of making extra work for for business owners. That's the opposite of what I think is important. So document your critical processes in a way that, again, is authentic to your business. Keep that documentation in in the place that you need it when you use it or the place you'll use it when you need it, and update it and keep it relevant. So those are the three things that are those are three things that can help you get your business ready, as if you do them early. To help you sell your business at the best value you can, one, get clear on why you want to sell your business to establish a timeline, and the longer you can go the better. And three, get your business ready to sell. Meaning you want to be able to to demonstrate the transferability of your business from yourself to a new owner. All right. Remember your business is important. For more about me and building business value, you can look in the description below if you're watching this on YouTube, or if you are listening to the podcast version, it will be my contact information, social media and all that stuff will be in the show notes. Connect with me on the social platform that you use in the links below. And ask questions, whatever suggest topics if there's a topic you'd like me to cover about transferring the value of a business whether you're selling or buying, let me know. Thanks for being here. Thanks for doing the hard work of being an entrepreneur. I'm looking forward to continuing our entrepreneurial journey together. Remember that doing it yourself. doesn't have to mean going it alone.
Transcribed by https://otter.ai