When I work with clients to get their businesses ready for sale, the first thing I look for is a great story. The seller must be able to tell the potential purchaser a great story about the business they are considering buying. I know a good story could take you to a better selling price for your business.
Today, with increasing competition and economic uncertainty, the entrepreneur must help create a story that the future owner sees themselves in. I’ve heard that over 500,000 businesses are going up for sale every month. Less than 5% of all businesses that are sold get the price the owner is asking for it.
Those are daunting numbers when you consider how much of a private business owner’s net worth is tied into their business. I have heard the number be as low as 50% and a high of 80%. In my experience, it’s closer to the higher number. Now for the good news, the market for your business is growing if you know how to take advantage of several key trends. To do this, you must know how to tell a good story.
Let’s start at the beginning of the process. For many entrepreneurs, it is critical to know how to structure their deal to get what they deserve. The foundation to getting what you deserve is knowing what you want for your business. Depending how well you have planned, the more likely you are to get what you want.
No matter how you structure your deal, you want to be able to attract the right buyer. In my experience, the right buyer is attracted to your business by your story. Since we live in a global economy, you may to be able to attract a global buyer. There are many organizations still looking to develop a market presence in North America.
I have found there are two types of stories that attract the strategic buyer. I share them here and then explain how you can learn to tell a great story. I learned about these many years ago from a very wise man. Over the last seventy purchases I’ve been involved in, they all come down to these key stories. When I started my career I wouldn’t have believed it, but it’s true.
The first type of story is the poor boy sandwich story. This story focuses on the fact that you’ve never had enough capital to implement some of the best marketing ideas you had for the business. You’ve done well, but with additional capital this business would explode with profitable growth. A solid story line and it produces a wide range of potential interest from many different types of buyers.
The second story is very similar and it revolves around the idea that the market has immense potential for the right owner or leader. A visionary leader could take this business to a whole different level. This story appeals to the potential buyer’s vanity. Not a bad place to start in selling your consulting or advanced technology businesses. After all, these visionary leaders have a shared motto, “We don’t just see the future, we create it.”
Both of these stories mean that you’re willing to tell a potential purchaser that you have taken the business as far as you can and new leadership and capital are required to go to the next level. Many successful entrepreneurs struggle with doing this because they feel it means they are not good leaders. I try to help them reframe it to understand that what it takes to keep a business growing is different from what it takes to launch a successful business. It’s true, but most entrepreneurs do not want to hear it. Many great businesses have been destroyed because the founder/owner and their leadership do not believe this truth.
Want to know more about your business’ hidden assets? You might also enjoy reading What’s Your Business’s Hidden Assets?
This article originally appeared in High Growth Business Report.