By Suzanne De Lucia CBI, Fellow Of The IBBA

Any business broker with two weeks in the business has heard this from prospective sellers who thought they were ready to sell their business and move on. When given a lower than desired valuation price from their broker, many business owners decide that they can grow and improve their companies to ultimately receive the selling price they want. It sounds good, but the reality of the situation is something different.

In my twenty plus years of selling businesses, I have seen only two cases in which the owners were actually able to make a significant difference in the value of their companies. One engaged the services of a business coach, spent a year and a half improving his business and then was able to obtain a price about double my original valuation. The other business owner made the needed changes, but continued to refuse good offers at the new and better price. I later saw his business at market at a lower price than I was able to achieve. I believe it has still not sold.

The purpose of this article is to convince business owners to look at reality when they think they want to sell. They have poured the blood, sweat and tears of a lifetime into their companies. Most have spent more waking hours at their business than with their families. Often, a desired price for the business is their perception of the value of this effort.

Unfortunately, the reality is that most business owners have given their company all that they can. Most lack the ability, energy or capital needed to go to the next level. Good intentions don’t always generate good results.

If you are going to reposition your business for sale at a better price, be willing to commit to a fairly long time frame. There has to be significant evidence of improvement in the business financials. A month or two does not make a trend. Lenders, in particular, are looking for a multi-year history of positive results before they’ll lend on a higher price.

My best advice to business owners is to start planning for the sale of their businesses on day one. Almost every owner thinks that their business exit will result in a pot of gold at the end of the rainbow. The national statistic is that only one out of five businesses which go to market end up selling. This is often the result of poor or no planning.

Unlike with their homes, many business owners don’t really know what their businesses are worth on the open market and are shocked when they discover the truth. In spite of the huge time commitments they give to the business, most owners put incredibly little energy into positioning for sale. So many things can be done ahead of time which not only determine the price and terms the business sale will command, but the very salability of the business itself.

Assuming you wish to someday be rewarded with a good price when you are ready to sell, work with a good business broker well ahead of your desired exit. Spend the time and money now to learn what your business is worth and what value drivers influence your price. Also know yourself and your abilities. Don’t kid yourself or underestimate the task of turning the ocean liner.

As a final note, my database of the companies who chose not to go to market because of price, shows that over 50% are no longer in business. Evidently, ego was worth more than cash in the pocket of these business owners.