Last week, I touched upon the fact that only 4% of small businesses break $1 million in revenues. What I also found out, fewer than 1% actually break $10 million in revenues. As the baby boomers are retiring and hanging up their work cleats, there will be a lot of turnover in business. We see it happening right now. But unfortunately, another astonishing statistic is that only 25% of businesses are actually in a position to sell or transition to the next level, which reflects that 75% of businesses are not able to sell to a buyer, and here are some reasons why.
Number one, their expectations are too high. It’s their baby, it’s their company, and they’re a little unrealistic about the value of their company. As they get out there, they start getting a little delusional about what they think it’s worth and what it’s really worth. Make sure you have somebody in your corner. Make sure you do a valuation of your organization so you really know what it’s worth. Most importantly and sometimes hard to do, take the emotion out of it.
Number two, inefficient or no systematization within the business. You have to have systems in the business. I’ll remind you again, systems stand for saving yourself stress, time, energy, and money. When you have your team adhering to the systems, and your systems are actually running the company, you now have a real business. If you’re not systematic, you are not going to be able to sell your company at the price you’re looking for.
Number three, and because you don’t have systems and you don’t have an aligned team, you have a glorified job versus owning a business. If we take you out of the business and the business doesn’t succeed, it’s not a business, it’s a job. That’s it. So again, go back to step two and make sure you systematize your organization so your business works for you without you versus you working for it.
Number four is improper management of the books. I met many business owners when I asked them about their numbers and they say, “Well, I do some things differently.” Listen, if you want to sell your business, you need to keep really good books. Make sure you have a good bookkeeper that’s keeping your books, and make sure you have a good CPA that can advise you accordingly. Don’t start co-mingling personnel with business, because when they run the evaluation one day, they’re going to back all that out. So, make sure you manage your numbers right, and don’t play games with your books.
And the fifth reason why a lot of people cannot sell their business, is they have the wrong people in their corner. There are some tremendously qualified business brokers out there that can help you to get really in tune with the correct valuation and give you the steps you need to take to get that company ready to sell. And if it’s not ready to sell it, you find somebody like me that can give you a six-point checkup to really grade yourself on what needs to happen to make that company ready to sell.
In conclusion, the five factors we’ve talked about that you need to be aware of; you have two high expectations of the valuation of your company, you don’t have any systematization, you have a glorified job instead of actually a business that runs by itself, you don’t manage your books correctly, and you have the wrong people in your corner. If any of these resonate with you, you’re either not going to get what you’re looking for or you just won’t be able to sell your business when the time comes.
Look for the right people, and put them in your corner. Do things right, and don’t be part of the 75% that can’t get out of their own business.
COACH MICHAEL DILL is an Award-Winning Certified Business Coach, global speaker, and published author. He is a proud Action Coach Franchise partner as well as the President of Power & Ice Wealth Creation a strategic leadership company that works with business owners, leaders, teams, and entrepreneurs to both develop a systematized and structured organization while accelerating their mindset, efficiencies, and effectiveness to grow both personally and professionally to achieve extraordinary results. He brings more than 40 years of business and entrepreneurial experience in his leadership, team training, and mentoring practice. Businesscoachmichaeldill.com