Why You Shouldn't Exit...
The Case Against Selling
If you're thinking about selling your business, don't! Don't even consider it until you read this article.
We always tell all our clients that you shouldn’t sell unless you have a good reason. You’ve done the hardest thing there is to do – start a business and find product-market fit. (Note: if you haven’t done that, you can’t sell anyway.) So assuming you have a good reason (and not all reasons for wanting to sell are “good”), let’s talk about whether you should exit (now) or not…
Without knowing anything about you or your business, I can say with 90% certainty that you should not exit yet.
I’m going to guess you haven’t spent the last 2 years preparing for your exit, which means:
- You’ll leave a significant amount of money on the table because businesses in just about every sector trade on a multiple of either revenue or profit. And the multiplier itself also increases as the revenue and profit numbers increase. So doubling the size of your business could triple or quadruple your valuation.
- You’ll fight an uphill battle in your search for a buyer because most buyers are looking for minimum revenue and / or profit numbers and simply won’t look at a business below their targets. This means the best buyers for your business won’t even engage because the acquisition is just too small for them.
- You’ll cause yourself additional stress because experienced buyers look for larger businesses. So you’ll end up working with a first-time buyer who doesn’t know what they’re doing. Every aspect of the deal: diligence, contract negotiations, closing, transition and post-sale support will be more difficult. (And that’s if they actually close, but there’s a strong chance their funding will fall through.)
In contrast, if you ensure that your business is truly exit-ready first, you’ll enjoy these benefits:
- Your business will be easier to sell because it’s been prepared specifically to meet the needs of buyers. They all want to see essentially the same things in a business they’re evaluating, so be giving them what they’re looking for you make your life infinitely easier.
- Your business will be easier to run because everything that makes it more sellable also makes it better for you. The hidden benefits of optimizing for your exit are: streamlined operations, reduced management overhead & costs, increased revenue & profit, improved team satisfaction and protection from competition.
- You’ll get a higher valuation because buyers will find it more attractive. This increases the value for each individual buyer, and by attracting more buyers and creating more competition you can drive the selling price even higher.
Take the 3-minute quiz on the next page to get your “Exit Score” and see how exit-ready your business is…