Selling your business: three exit myths that could let you down
For many owners, selling their business is something they’ll do only once. If you started yours from scratch, you may never have been through a business purchase either.
It’s unfamiliar territory. And after years of doing everything it takes just to run the business, it’s easy to understand why - especially when you think you have a get-out-of-jail card - you think you can get back to the 'exit bit' later, or 'when I'm ready.
These get-out-of-jail cards can be things like:
- “I can always sell the stock.”
- “Someone will buy my customer base.”
- “I’ll drop the price for a quick sale.”
I’ve spoken with owners who relied on ideas like these, only to discover that the money, timing or buyer interest fell well short of what they expected.
The disappointment and regret in those conversations stay with me.
The assumption is that these 'free passes' will actually work. The myth is that they will be available whenever you decide to pull the trigger.
Here are three assumptions worth testing while you still have time to do something about the answers.
Myth 1: “I can always sell the stock”
The thinking is straightforward: if you can’t sell the business, at least you can recover the money tied up in stock.
But what does “stock value” mean? What you paid for it? The amount in your accounts? Its retail price? Or what someone will pay to take it off your hands?
Those can be very different numbers.
A buyer taking the lot may want a substantial discount.
They may want your best-selling lines but leave you with the slow-moving, obsolete or specialised items.
Selling stock individually might produce more money, but you already know that takes time and you'll be continuing to pay the bills needs to run the business in the meantime.
The questions to test: Is there buyer for all your stock at a 'fair' price in the timeline you have in mind? What would that net you after continuing to run the business until all the stock is sold?
The same logic applies to plant & equipment.
In either case what it cost you originally - or what it costs to replace now - won't necessarily establish its resale value, especially when it's pretty clear to the potential buyer that you're running out of options.
Myth 2: “Someone will buy my customer base”
You’ve spent years building those relationships. Surely a competitor would pay for access to them?
Possibly. But a customer list and a transferable stream of business are different things.
A buyer will want to understand:
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How many customers are active and returning?
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How much profit does their work generate?
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Are they loyal to the business, or personally loyal to you?
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What would encourage them to stay after a change of ownership?
If you’re central to those relationships, the buyer may need you involved in the handover.
They'll almost certainly want payment to be performance based so that you what payment you receive will be linked directly to how much business actually follows and over what time frame..
A competitor might eventually figure out they don’t need to buy anything. If they wait and you close, they could convert the customers 'for nothing' themselves.
That doesn’t mean your customer base has no value. It means you need to understand what a buyer can realistically retain and earn from it.
Any proposed transfer also needs to account for customer agreements and privacy obligations.
The question to test: What exactly would the buyer be paying for -and what evidence supports your expectation that customers will stay?
Myth 3: “I’ll drop the price for a quick sale”
Reducing your price significantly isn't a sure fire way to quickly bring in more buyers.
If the business is advertised on a business for sale website a price drop might bring in some more enquiries. Along with more and more questions they'll mostly stay enquiries.
To sell you have to be 'in front' of the right buyers.
It's your job as owner to know who are your most likely buyers and will they be scouring the business for sale listing sites?
You can use a bit of science to identify buyers. Start with your industry or your location. While it might challenge you it's possible. The end result is a list to contact for discussion. If you get interest from them and you understand why it would make sense for them to buy you you got a genuine enquiry to work with. And that's when pulling the 'price lever' can really help you.
Getting to this deeper understanding of your potential buyer's motivation and capacity is overlooked but vitally important.
If you don’t know why buyers are hesitating, cutting the price probably won't help.
The questions to test: Am I in front of the right buyer? Is price actually stopping a potential sale - or is there another issue that needs addressing?
Thinking about the future ownership of your business?
My three-stage Value + Sellability Diagnostic helps owners understand how ready their business is for a future ownership transition - whether that involves a sale, employee ownership, family succession, a management buy-out or another pathway.
Because the best ownership transitions don't happen by accident. They are designed.