Even as early as while your business is ramping up and poised for victory, you have to be ready for any possible eventuality, and that includes the possibility of having to sell. Constantly embodying a seller’s mindset is the key to making sure you’re prepared to make the tough calls and the essential choices when the time comes. Michelle Seiler Tucker talks about the importance of a seller’s mindset when planning out an exit strategy. There’s no such thing as a “perfect” time to sell, so you can’t constantly be waiting. But if you stay ready from day one, you’ll be able to exit as smoothly as possible.
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Step Into A Seller’s Mindset, Planning Your EXIT
We’re going to talk about stepping into a seller’s mindset. Timing is everything. Timing is imperative when you get married. Timing is important when you have children. Timing is a necessity when you plan for the sale of your business. I talked about the STGPS Exit Model on the show. It’s all the steps on how you should plan your exit. Instead of the steps of it, we’re going to talk about the mindset by stepping into a seller’s mindset and why you should sell your business. Why you should plan your exit to sell your business? The reason is that there are 32 million businesses in the United States and 99.9% of those are small business owners.
The business landscape has changed dramatically. You hear about all the big-box retailers dropping like flies, Toys”R”Us and JC Penney. GNC closed down 900 locations. What you don’t hear about is a small mom-and-pop business on every street corner, in every city and in every state across the nation. These business owners are having to close their business or even worse, file bankruptcy. When you file bankruptcy, you lose your business assets, but you typically lose your family assets too because most business owners commingle their business and family assets. They sign a personal guarantee, they mortgage a home or a line of credit. My mission is to stop business owners from having to close and file bankruptcy.
My mission and my passion are to get as many business owners as I possibly can to plan their exit. Eight out of ten businesses will not sell. It’s important that you start thinking about this and you start setting yourself up for success. A successful exit when you are timing is right. To do that, you have to get into what I call the seller’s mindset and do some major soul searching because the problem is many business owners will wake up one day and they’re like, “I’ve had it. I don’t want to do this anymore. I can’t take it.” They get burned out because of dealing with the everyday stress of business.
“Timing is so important when you’re planning for the sale of your business.”
Business can be stressful, especially if you don’t have the right team in place. Business owners get burned out on the industries changed. Maybe their product was thriving and now it’s dying. Maybe they had a great customer base and now they’re losing their customer base because consumers’ buying habits change. Maybe they haven’t diversified their client base and their client base is aging out. Technology’s changed. Catastrophic events occur, hurricanes, tornadoes, and COVID-19. We’re all facing this. Many business owners have had it with employees. They can’t take the stress of managing employees anymore.
There are also those external and internal events: divorce, health issues, death, partner disputes, death of a partner or a family member, having to relocate or issues with children. All kinds of different external and internal catastrophic events can cause a business owner to want to sell their business. When a catastrophic event has occurred or if you get burned out and you’re done, then your business is typically turning down or not upward. It’s going in the wrong direction. We need to be going up in order to sell the business, to exit the business for your desired sales price. That’s why it’s important not to wait until you can’t take it anymore. It’s important to plan that exit. You exit on your terms. The best time to sell is when your business is doing well.
I’ve been doing this for many years. I’ve sold hundreds and hundreds of businesses and most owners’ struggles are the same. Their struggles are real. They’re selling a business, which is their baby. It’s like when you send your kids off to college, parents suffer from the empty nester’s syndrome, “What am I going to do now? My kids are gone. That’s my identity.” It’s the same thing with a business owner. It’s your identity. It’s what you’ve known for 20, 30, 40, 50, 60 years. It’s not your identity, but it has been for so long. It’s hard to part with your baby. It’s hard to part with your identity. It’s difficult. That’s why a lot of deals never close because of seller’s and buyer’s remorse.
Right now, we’re going to deal with the seller’s remorse. How do you avoid the pitfalls of changing your mind? How do you avoid the pitfalls of the seller’s remorse? I always tell my clients, you have to do some major soul searching and you cannot plan your exit and tell you planed your beginning. What are you going to do next? What’s waiting for you in the next phase of your life? What do you want to do? What are you passionate about? Many owners have been working in their businesses for decades. Their passion is buried deep underneath their business commitments or family commitments, their friends, life, everyday life struggles, passions get buried and you forget what you once loved to do.
I have a great story to illustrate this point. I was once selling a medical practice, husband a wife and they’ve been in business for decades. They were on the fence about selling. They don’t want to sell. I kept working with them and said, “What do you want to do next? What’s in your next phase of life? What’s your beginning strategy? What have you always wanted to do but never had the time or the money to do it?” They’re like, “We don’t know.” One time they called me and it’s pretty late at night. They said, “Michelle, I had an epiphany. I now know what I want to do.” They were excited. I said, “What do you want to do? Can’t you call me in the morning?” They said, “We’ve always wanted to own a bed and breakfast. We’re passionate about that. We’re excited about that. We’ve stayed in bed and breakfast all over the world and we know exactly what we want to create and how we want to create it.”
They now know what they want. They have created the next phase of their life, their beginning strategy. They’re much more comfortable exiting but it took some time to get them there. Most of the owners have to go through this process to decide, “If I exit my business, if I sell my identity, if I sell my baby, what do I do next?” You’ve got to give that some thought and you’ve got to spend some quiet time to think about what it is that you liked. What did you like doing when you were a kid? What did you like doing before your passions got buried with the everyday commitments of life and your business? Do some soul searching to try to figure that out because you cannot plan your exit or you will not have a smooth transition unless you plan your beginning.
“Nowadays, children want to go out there and create their own masterpiece.”
When I tell my clients to do some major soul searching, some of the things that I want them to do is make a list. On one side, write down what I want and what I don’t want in my business and life anymore. On the second side, what I do want in my life. Make that list and it could be something like, “I don’t want to talk about my business 24/7 anymore,” on the don’t want side. On the want side, “I want to take stress-free vacations.” It might be, “I don’t want to deal with employees anymore,” on the don’t side. On the want side, “I want to spend some more time with my family.” I walked through this exercise with my clients and I have them go through the don’t wants and the wants. I have them get crystal clear of what they want and I have them tear up the don’t want side. They completely tear it up because they don’t need it anymore. Catch it on fire. Whatever makes you feel good to get rid of your ‘don’t wants,’ get rid of that and focus on what you do want.
If you say, “I still want to run my business. I still love my employees, my customers and I want to serve them,” maybe exiting is not the right timing for you. That’s why this exercise is important for you to determine why and when you should exit your business so you don’t become a statistic. Next is what I call the Seller’s Sanity Check. There’s a series of questions I take my clients. You should ask yourself, “How much will my business sell for?” You’re not going to know that. You’re going to have to contact an expert to do a business evaluation and let you know what your business will sell for. That’s question number one, “What will my business sell for? What will be my tax liabilities? How much debt do I owe? How much will I walk away with? How much is my lifestyle on a monthly and annual basis?” These are important questions.
When you work with financial planners, what do they do? They ask you, “When do you want to retire? Twenty years? In twenty years, how much do you need a month to live on?” It’s the same thing with selling a business and exiting your company. What’s your lifestyle? How much do you need to live on? Will the sale of the business afford my lifestyle? Do I have to get a job? Do I have to buy a company? Where am I going to invest my money? Let’s say I cash out for $10 million, where am I going to put that $10 million? Believe it or not, cashing out for a high price causes stress too.
I walk with my clients to determine all these things and answer all these questions. I also walk with my clients where they can invest that money? If I dumped $10 million on their lap, what are you going to do with for $10 million? Where are you going to invest it? I make sure that we have a solid plan in place so they can afford their lifestyle. They can finally do that B&B or buy a different business or start a different business or retire and travel the world or whatever it is that you want to do or buy an island. I’ll walk my clients to determine all of this.
The other important questions are, “Will the new owner take care of my business? Will they grow my legacy? Will they take of my employees? Will they continue to provide the same level of service, the same quality to my clients? Will they take care of my vendors?” All these questions have to be asked. This is called the Seller’s Sanity Check. You cannot exit a business without number one, knowing what you want and what you don’t want. Number two, most importantly, knowing how much money you need? How much you need to live on? How will you still be comfortable? You can’t do that without knowing the Seller’s Sanity Check and being able to answer these questions and give you the peace of mind and comfort level that you need in order to move on with your exit.
There are different types of exits. There’s transfer to family and the kids. Back in the day that used to be a pretty prevalent idea of transferring your family business to your children. Nowadays, children don’t want it. They all want to go out there and create their own masterpiece. They want to go out there and do their own thing. They don’t necessarily want to inherit mom and dad’s business. That’s not a viable solution as it once was and maybe, but you’ll have to answer that. You can also sell to your employees. We’ll do an episode on exiting to your employees and the pros and cons of that.
“Don’t just keep waiting for the “perfect” time to arrive because it may never come.”
There is also selling a percentage of your business. It’s not necessarily that you have to sell 100%. You can sell 60%, 70%, 80% of your business. You can also hire a management team to run your company and you get passive income. That can be difficult too because you’ve got to have the right management company in there and who’s going to manage it. You can sell your company for 100% cash out. If you have real estate, you can 1031 that real estate. There are lots of other programs that you can invest your money in. I walked through all of those ideas with my clients and help them plan their beginning before they plan to exit and make sure that we’re meeting their Seller’s Sanity Check to their satisfaction so they’re comfortable.
To wrap up this episode, know what you want and know what you don’t want. Some great quotes that I would like to go over with you really quick according to BizzTrade, “Did you know it can take almost two years to sell your company?” You’ve got to start planning like you’re planning for your kids to go to college. You’ve got to plan to exit your business. Plan what exit fit yourself and your family’s needs best. CNBC states that many sellers hang out for the perfect time to sell their business and the perfect time never comes. Don’t wait for the perfect time because the perfect time may never come. A catastrophic event can occur and then you’ll be forced to have to close your company.
CNBC also states that seller’s remorse is common because owners have not figured out what they will do after the sale of their business. Owners cannot figure out what they will do after the sale of their business. It’s not just me saying this, it’s CNBC saying this too. Before you plan your exit, plan your beginning. Go through the Seller’s Sanity Check, put together what you don’t want and what you do want. Tear up the ‘don’t’ side and focus on what you want.
We go around ‘want.’ You have grown your business. You’ve put your heart, soul, energy and money into growing your business. You made huge sacrifices along the way. This is your legacy. This is something that takes planning. It takes timing. It takes getting this right. You don’t want to get this wrong. I always tell my clients it’s hard to read the label from the inside of the bottle. You need an outsider’s perspective to do so. Align yourself with someone who can walk you through this process because you don’t want to leave your baby in the wrong hands. You want to make sure you plan the right exit for you and your family. Thank you so much for joining me. Have a wonderful day.
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