Before Selling Your Business, Finish Strong

Let me take you back to a track meet my junior year of college. I’m on my last event of the day, and I’m drained. I’m running the 1500 meter race, and everything is going well. I’m not in the lead, but I’m running strong.

I round the corner and gear up for my final lap. As I pick up the pace, I start passing people left and right. I see the finish line and sprint for it. As I close in, confident of my victory, the start judge hollers out, “One more lap to go.”

I had miscounted, and the realization left me crushed. I pushed on, but my drive was gone. Psychologically, I was defeated. Pretty soon, everyone I had passed came running by, and then some. I finished with my worst time ever.

I tell this story a lot when I’m talking to business owners. Why? Because just like a race, you need to finish strong, and in order to do that, you need to know where the finish line is.

Most buyers focus on the TTM (trailing twelve months) to evaluate what they will pay for your business, not what your EBITDA was five years ago in your peak, before you got tired, before you lost your mojo.

One of the biggest misconceptions we encounter is that owners think their business will sell quickly and leave them free to walk away. This is rarely the case.

In fact, it takes an average of 9-11 months to sell a lower middle market business, not including a transition period. Now here’s the real rub: In the United States, the number two reason business owners sell is burnout. (Number one is retirement.)

That means many sellers are mentally exhausted before they even get to the starting line and talk to their advisors. Still, we urge them to push strong for one more year. Make the last year the best. If sales and profits are increasing because you are sprinting to that finish line, your business will be more salable.

The best time to sell is when you don’t have to. You want to be sprinting to the end with energy and confidence. Enter a sale with a positive attitude, and you will have much better leverage than if you seem ready to hand over the keys at any price.

By Scott Bushkie