The Truth About Selling Your Business
You can learn the steps to sell your business, but the truth is even if you follow them, you’re only halfway there. The process of selling your business is two journeys, not one. There’s the outer journey of creating a valuable asset that other people want to buy, and the inner journey of managing your mind along the way.
The way you manage your mind is the most important indicator of how much money you receive and how you feel at the end.
Do your thoughts control you, or do you control them? It matters. Many business owners tell me the reason they want to sell is that they are burned out, or sales are down and they are worried because their business is declining. I know right then that they’re not going to get the best price for their business – if they can even sell it at all.
The way you think and feel about your business affects the way you run it and the way it is perceived by potential buyers. In order to successfully sell your business, you have to feel good about it. You have to believe your business is a valuable asset that can run without you or no one will want it.
Taking your eye off the ball will cost you.
One of the hardest things to do when selling your business is to continue to run it. It’s so easy to get distracted by the prospect of a sale that before you know it, you’re not trying as hard to get new work, or you’re overwhelmed by the due diligence requirements and take your eye off the ball. No matter what, you must keep following good operational practices because you don’t want the value of your company to fall during the process of selling it. You want to get the most for the business you built. Here’s an example.
Most of us know it’s not a good idea to depend on any one client, and a good rule of thumb is: don’t let one client be responsible for more than 15% of your revenue.
Over time, as Melissa’s business grew, she landed larger contracts. The day she won her first contract for $250,000 she told me the best part was that the client needed the work completed in 90 days, which would be great for cashflow. She had started to think about selling her business and the lure of the $250k in 90 days was so great that she didn’t listen to her instincts, even though she knew that relying on one customer for all the revenue that quarter was a risk. She contacted her other clients and asked for deadline extensions so that she could fit in this new work. After two months of project planning, she was ready.
The day before the entire team headed onsite, she opened an email that made her feel sick. The client’s board of directors had placed a hold on all contracts because the president was being investigated. Everything was at a standstill until all contracts were reviewed.
She was angry because she had cleared the schedule for the entire company and had nothing else for the team to work on. I listened she raged, “They have a signed contract with me! It’s just not fair. We won’t hit our financial targets this quarter because of this, which is the worst possible timing. I can’t call my other clients back and tell them we suddenly have capacity after I asked for an extension. They will know there is something wrong and rumors about our company will damage our reputation!”
Know the difference between thoughts and facts.
Melissa believes her thoughts are facts. In this situation, there was only one fact: “They have a signed contract with me.” All the rest of the thoughts are interpretations.
She may think it’s a fact that it’s not “fair”, but it’s not. A fact is a fact for everyone. And in this case, the people who placed the contract on hold believe it is fair because they are protecting themselves. It’s also not a fact that she won’t hit her financial targets this quarter because it hasn’t happened yet – she is imagining what she thinks might happen in the future. “I can’t call my other clients back and tell them we have capacity after I asked for an extension” is also not a fact. She can call them back; nothing is physically preventing her.
What prevents us from taking action is our thoughts.
What’s preventing Melissa from taking action is the thought, “They will know there is something wrong!” Because she is not deliberately managing her mind, here’s how she handles the situation by default:
- My largest contract is on hold and I can’t call other clients and ask them for work because they will know something is wrong. I feel embarrassed. So instead I get angry, worry, call a friend and complain. I don’t call other clients (inaction) and the result is I don’t have work for my team. This provides evidence that there is something wrong – there’s no work to do!
After the shock wore off and she was ready to turn the situation around, the first thing to do wasn’t to pick up the phone and call her other clients. The first thing to do was to identify the feeling she wanted to have when she called the clients because, if she called them from a place of feeling weak and desperate, she would not get the result she wanted.
The way we feel fuels the actions we take.
“How do you want to feel when you make the call?” I asked. “Confident,” she replied. “And what thoughts create that feeling for you?” After thinking it over, she said, “When I remember how much value that my company and team provide and tell myself that we are the best in our field, then I feel confident. When I think that way, I don’t believe they are doing me a favor by giving us work, instead, I realize that we are delivering excellent solutions that they need!” Here is what she decided to think and the result she achieved:
- My largest contract is on indefinite hold. In order to find more work for my staff, I remind myself to think about how much value we add and how much our clients need the solutions we provide. This makes me feel confident and I contact three of my clients letting them know we have the capacity for their projects. I offer them start dates in the next week and the result is that two of the three say yes and I have work for my staff.
After the immediate crisis passed, she could see for herself that the way her company was structured would make it difficult to sell. No buyer would pay a premium for a company which had this much variability in cashflow, and this much risk.
She made two business decisions which made her company stronger and increased its value in the long run. The first was to never allow one client to consume all her company’s time or account for more than 15% of her revenue. (In fact, business insurance companies charge higher premiums for general liability if you exceed that number.) The second decision was to charge a nonrefundable deposit of 30% for every contract over $100k. Putting these practices in place made her feel more confident because she was setting the rules.
Selling your business is two journeys: the outer journey and the inner journey.
Even more important was the way that she learned how to manage her mind during the process. Many situations like this occur in the life of a business owner. Deciding how we want to feel, and identifying the thoughts that will generate that feeling before we take action is what will make the difference in our results.
In this case, the outer journey resulted in two new policies that strengthened her business and made it more valuable. The inner journey was the process of learning to intentionally choose thoughts on purpose which create feelings that lead to actions which get the results she wants.