If you're currently successful owner (and possibly looking to sell the business), you may be suffering from a very specific kind of vision problem.
Many people call it “tunnel vision” but it’s really just a matter of focus.
You see, as a successful business owner, you’ve no doubt been focused almost exclusively on the company for a long time now. You’ve sacrificed money, time, and a lot of effort to get it where it is today. You know your business inside out and upside down, better than anyone else could.
While you’re running your business this “vision problem” is one of the keys to success. It’s what it takes for entrepreneurs to overcome the inherent obstacles and move their companies forward.
But, if and when you’re ready to consider selling your business, it can present some real challenges.
Consider the independent neighborhood drug store
Let’s use a small, independent drug store as an example. (Although a franchise drug store would work for most of this conversation, there are certain aspects of franchise ownership that limit the owner’s emotional investment, so I’ll leave that for another article.)
If you own that neighborhood drug store and you’ve run it successfully for 20 years, there’s not a single product or service in that store that you’re not intimately familiar with. You probably know most if not all of the customers who frequent the store, and you may even call each other by your first names.
You stopped noticing that stained ceiling tile in the corner five years ago. You’ve just gotten used to how your stocker, always seems to forget to straighten the pain reliever shelves, so you just do it yourself without a second thought. Everyone knows where you are, so the fact that the paint on the window is faded and peeling doesn’t really matter, does it?
Can you see where these views could hurt a potential sale?
When you consider selling your drug store, your daily involvement and hands-on perspective could cause you to:
- Overestimate the true financial value of the business
- Overlook necessary improvements to the property
- Overlook the fact that your books and records are a mess
There are probably a dozen other important items you’re going to overlook or wrongly discount because you’ve simply grown so accustomed to “the way things are.”
The simple answer
So, how do you know when your business is ready to sell?
Your business is ready to sell when you yourself would buy it.
Now, what does that mean?
It means that, to effectively prepare your business for sale and ensure that you’re able to squeeze every dime of value out of it at the time of the sale, you have to take off the blinders every successful business owner has to wear. Instead, you need to look at your business the way your prospective buyer is going to: objectively and critically.
How does your prospective buyer view your business?
If you can think back to when you purchased your current business, before you became emotionally invested in the company and everything it stood for, what were you interested in?
You wanted to see financial records that clearly showed a profitable history. You wanted to see a property that was well-maintained and in good repair. You wanted to make sure all the company’s legal affairs were in order and that you were aware of any contracts, liens, or other matters that would be coming with the purchase if you moved ahead.
And, perhaps most importantly, you wanted to make sure that the business was set up in such a way that when the owner you were buying it from left the business, all the items you researched would continue to hold true as you transitioned into ownership.
How would you review all this information? Would you want to be swayed by the current owner’s gushing enthusiasm for the company, or by the current employees’ love of their jobs?
No. You’d need to view all of it objectively, with a critical eye for detail.
Any prospective buyer would do the same.
What if they were buying that drug store?
Based on the situation described earlier, an objective and critical buyer might not even go as far as inquiring about a drug store with faded and peeling paint marring its main storefront signage. It shows a lack of interest in maintenance and repair, which could very well mean other parts of the building or even the business itself may have been severely neglected.
If they made it through the front door, the stained ceiling tile would likely confirm their suspicions. And even if they could overlook that, they won’t be able to overlook the poorly maintained and organized records and accounts.
You wouldn’t even get a chance to mention the stocker's poor memory.
How can you view your business like a buyer?
The blinders that made building and running your business possible need to come off in preparation for the sale. You need to take a long, hard look at your business through the eyes of an objective, critical buyer. Then, you need to conscientiously remove any impediments to their seeing the true value of the business you’ve built.
Because then, once the little things that can distract and disappoint a prospective buyer are removed, they’ll be in a position to appreciate and agree with the enthusiasm and love you express for your company.
Find additional help to selling your business by reading our guide.