Years ago, I worked for a business brokerage. I had recently sold a business and
was fascinated by the process. In selling my business I found some interesting
statistics. I learned that most businesses never plan to sell their business and
in fact are reactionary in selling their business. As I went on to help others
sell their businesses, I found three typical reasons for wanting to sell:
1. Burned out: They had struggled for a long time and were not really doing what
they loved and adored.
2. Change of circumstance: Either they or a loved one became sick, died, or
something drastically changed in their lives that their business no longer fit.
In this category are the folks who want to leave the business to their kids and
the kids don’t want it.
3. Financial fall out: Either they had struggled down to the bottom, they had an
unexpected expense, or they simply got caught with their shorts down when the
big box store moved a block away.
No matter what the reason was, less than 5% had a reasonable expectation of
where they should price their business and were disappointed when I gave them a
fair market valuation. The formula is simple: Take your inventory, F F and E
(Furniture Fixtures and Equipment) put garage sale pricing on all of it. Add in
any real estate. Then, depending upon how long they were in business, you had a
factoring of good will (profit or customer base) based on the frequency and
fluidity of purchases. This is a simple formula and in no way represents what
your business may or may not be worth. Let me explain why.
Here are some of the struggles in the wedding industry: 1. There is always used
gear, equipment and any necessary inventory one could purchase at fire sale
pricing. 2. Rarely, if ever, is there real estate involved. 3. Good Will is
non-existent because we only see our customers once. We do not have repeat
customers and anyone buying a business will do so based on walking into an
existing customer base.
Because we have a hard time putting value on our business (not that our
businesses our worthless, but they are hard to value to sell), we spend a ton of
time building something that has no worth to anyone but ourselves. That is why
my suggestion is we systematize everything that we do.
By systematize, I speak about putting ourselves out of the business and working
to have the people we hire work the systems we have created to run the business
and make the money for us. The biggest involvement in your business could come
down to stopping by and picking up the money once a week. The key becomes being
able to translate the things that you so aptly do to someone else who will do
them just as well, while making you a few bucks.
While it is easy for me to speak about doing this and it happens everyday in the
wedding world; the fact is we will have a huge struggle in trying to find a
buyer who can. Think about how hard getting proper credit has become, let alone
finding the person who is willing to leave their security at their full time
If you are looking to start an exit strategy and are looking for help, connect
with me and let’s talk about potentially working together to help you build you
business up so you can step out.