The Psychology of Selling – Are You Sure You’re Ready?
More than likely, selling your business is one of the biggest decisions of your life. Unless you own a business, it is impossible to understand just how all-encompassing of a process it can be. With that stated, it is important for business owners to step back and seriously reflect on whether or not they are truly ready to sell. The psychological aspects of selling are not trivial. Various aspects must be taken into consideration before initiating the process to sell.
There are many reasons why it is vital to step back and think about whether or not you are really ready to sell your business. Far too many business owners believe they are ready to sell, only to discover (much too late) that an executed sale is not optimal for their plans.
Selling When There is No Other Choice
Selling a business because there is no other choice, such as situations concerning failing health, personal issues or problems with a business partner, isn’t a true choice at all. In this situation, the psychology of selling is essentially irrelevant, as you have one option, namely, to sell.
The Case of Burnout
In other cases, owners eventually hit a brick wall and have no choice but to consider selling. As burnout sets in, owners may feel that the time is right to “hang up their hat” and put their business up for sale. However, as the process evolves, even those experiencing some level of burnout can discover that they are not emotionally or psychologically ready to sell. In many cases, people make this realization only once it is too late.
Take the Time for Self-Reflection
Quite often, a company becomes interwoven into a business owner’s sense of self, sense of place in the world and even, to an extent, sense of self-worth and identity. When business owners are unaware of this fact, it can be something of a shock to their system to begin the sales process. Many people simply are unaware of the strong hold that their business has on them.
Owners need to invest some time in self-reflection and ask four key questions: Do I really want to sell? If the answer is yes, then why do I want to sell? Will I regret selling once my business is sold? What will I do after I have sold my business? Answering these questions involves far more than evaluating your business. They also involve diving into emotional issues that could be central to your future.
Are You Really Ready to Sell?
One of the best ways of determining whether you are ready to sell, and preparing your business for that potential sale, is to work with a business broker or M&A advisor. Business brokers are experts at helping business owners deal with every aspect of the process of selling a business. They can act as experienced guides that can use that experience and expertise to help you determine if you are truly ready to sell.
If it turns out that you are indeed ready to sell, a brokerage professional can help you prepare so that you can achieve the best price possible once your business hits the market.
Copyright: Business Brokerage Press, Inc.
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When Should You Think About Selling Your Small Business?
There are many reasons why small companies are put up for sale. Some of the more common reasons can actually have little to do with the company’s general performance. For example, many small business owners discover that they need to sell for health reasons or personal concerns, such as divorce or partnership issues. While a business downturn or fear of a larger competitor looming on the horizon might prompt many business owners to sell, economic drivers are not the only issue. Owners may want and need to sell, but often it isn’t always that simple.
Many business owners are looking to retire, but are unpleasantly surprised to learn that they simply can’t afford to do so. Still yet, many business owners don’t truly want to retire or sell, but instead they just want more freedom in their lives. The day-to-day responsibilities of owning and operating a small business can take their toll. Many business owners are looking to make a change and would love to be free of this burden. This class of owner has already “checked out” mentally, and this can have profound negative consequences for their businesses.
When an owner wants out but discovers that he or she simply can’t afford to sell or retire, it will come as no surprise that there is usually an accompanying drop off in enthusiasm. Ultimately, the vast majority of owners will start to lose focus. Often, we find that they stop investing the capital necessary to continue the growth of the business, which can trigger other events, such as the loss of key staff members and/or customers. Losing a top customer to a major competitor can further accelerate the downward spiral. The failure of the business to maintain its footing and competitive advantage can lead to a more aggressive posture by existing competitors or even encourage a new competitor to move into the market.
In time, the owner may come face-to-face with the harsh realization that they have no choice but to sell if they are to salvage any of the business’s value. The best way for a business owner to safeguard against this situation is to sell when his or her business is doing well, as this helps to ensure an optimal price.
Working with a business broker, even years before one is interested in selling, is one of the single smartest moves any business owner can make. The time to think about selling your business is now, as no small business owner knows what life or the market will bring.
Copyright: Business Brokerage Press, Inc.
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Is Your Business Charging Enough For Goods & Services?
A small increase in what you charge for your goods and services can make a tremendous difference to your bottom line. The fact is that many businesses could charge more for their goods and services than they do, but fail to do so. Owners often do not realize the great value of charging just one-percent more. In this article, we’ll explore how charging even slightly more can dramatically impact your business.
Let’s consider a hypothetical example. A business owner tells a potential buyer that he or she could safely increase their prices by 1.5% and do so without the price increase causing any negative impact to sales or business disruption. The savvy buyer quickly realizes that the business, which has $70 million in sales, is leaving $1 million dollars on the table by not increasing its prices by 1.5%. A smart buyer realizes that after purchasing the business, all he or she has to do is institute this small price increase in order to achieve a sizable increase in profits.
In his best-selling book The Art of Pricing, Rafi Mohammed explores the often-overlooked area of pricing. He keenly observes that one of the biggest fallacies in all of business is to believe that a product’s price should be based on the cost of the product. In The Art of Pricing, Mohammed points to several examples. One comes from the restaurant industry. He points to the fact that McDonald’s keeps entrée prices attractive with the idea of making up profit shortfalls in other areas, ranging from desserts to drinks and more. Or as Mohammed points out, McDonald’s profits on hamburgers is marginal. However, its profits on French fries are considerable.
Mohammed’s view is that companies should always be looking to develop a culture of producing profits. He states, “through better pricing, companies can increase profits and generate growth.” Importantly, Mohammed points out that it is through what he calls “smart pricing” that it is possible to extract hidden profits from a business. Summed up another way, pricing couldn’t matter more.
All too often business owners, in the course of their day-to-day operations, fail to place sufficient importance of pricing. Any business looking to achieve more will be well served by first stopping and taking a good look at its pricing structure.
Likewise, buyers should be vigilant in their quest to find businesses that can safely increase prices without experiencing any disruption. At the end of the day, small changes to pricing can have a profound impact on a company’s bottom line.
Copyright: Business Brokerage Press, Inc.
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10 Keys to Selling Your Business for Profit and Satisfaction
Your business is the key to your legacy and your future. If you decide to sell, it pays to do it right.
There comes a time in the life of every business owner when you need to move on to something new, retire, or let your business go to someone with new energy and ideas.
As a business advisor, I always have qualms about recommending this move, because the process of selling your business can generate more pain and loss than continuing to run it yourself.
Since I’m not an expert in this area, I was pleased to see a new book, “Exit Rich,” by a couple of leading authorities on how to do it right, Michelle Seiler Tucker and Sharon Lechter. They not only focus on the positives, but include some succinct advice on what not to do.
Their top items of guidance resonated with what I have seen in my own experience, paraphrased here as follows:
1. Don’t wait until you are burned out or lost interest.
Selling your business requires the same energy and passion as growing it. Once you have lost that edge, and potential buyers will sense it quickly, the value of your business will trend down quickly. You should plan an exit strategy, and optimize your activities and timing to get top dollar.
2. Refrain from telling associates that you are selling.
It’s amazing to me how people always assume the worst. Especially if people hear rumors of your interest in selling, they will assume that you are fighting bankruptcy, being pushed out, or your personal life has fallen apart. Limit your disclosures only to business brokers, and serious potential buyers.
3. Don’t decide to do it yourself, without professional help.
Selling your business is much like starting it, and not something you can do in your spare time. The critical tasks, which require professional skills, include packaging the business, actively marketing it, negotiating terms, and due diligence. Trying to do all this yourself is a recipe for disaster.
4. Depend on a business broker.
Selling a business is not just selling a business property. The buyers are different, the rules and contracts are new, and focused marketing is required. I recommend contracting early with an experienced M&A advisor or business broker, and following their lead, rather than finding a friend.
5. Don’t negotiate based on current month-to-month lease.
If your location is key to the value of your business, make sure you have a long-term lease, or at least a guarantee of renewability. What you don’t need is a buyer dealing directly with your landlord to get your key asset, leaving you with no leverage and minimum value for the sale.
6. Don’t price the business based only on your instinct.
Selling a business, like any other asset, requires a realistic appraisal of value. Many owners have no appreciation for the value they have built up over the years, while others tend to always have an inflated view of their worth. Neither perspective is good for credibility or a fair result from your sale.
7. Don’t disclose proprietary information without an NDA
I have found that entrepreneurs often don’t appreciate the need for intellectual property or their “secret sauce” when looking for an investor, and are quick to give away the details when selling the business. Not getting a signed non-disclosure before negotiating can cost you dearly in value.
8. Sign with a buyer with proper due diligence.
Just like potential buyers will do the due diligence on you, you should be as thorough in checking their credentials, intent, and history. Don’t risk your business, your personal legacy, and your time on unqualified buyers and scams. This task is a key one for your professional business broker.
9. Never grab the first buyer’s offer without a plan B.
The evidence I see indicates that less than forty percent of business sales come to fruition the first time around. Create a sense of urgency by setting up back-to-back buyer meetings, and letting potential buyers see each other. Always be ready to talk about future growth plans, as an alternative to a sale.
10. Also never assume that selling to an employee is quick and easy.
Here the evidence is strong that sales to employees don’t work out well. Most employees have a limited perspective on the role and financial requirements to be an owner. In addition, normal negotiations may cause employees to become emotional and leave the business or work against you.
I always remind business owners that their business is likely their most prized possession, and the sale is one of the biggest decisions in their life. It’s a very complex process, as well as an emotional one.
From your own experience, you know that complex decisions should never be made on emotion. Get good professional help here, and enjoy the legacy you deserve.
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The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.
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Article: Inc.com (Author: Martin Zwilling)
Photo: Getty Images
3 Steps for Achieving Pricing Power
The simple fact is that most of us want to control our own fate. This fact is especially true for entrepreneurs and business owners. However, the truth of the matter is that for most business owners, their fate isn’t completely in their own hands. For example, a variety of forces can prevent businesses from establishing their own prices.
Knowing whether or not your company has pricing power is essential and can influence a range of decisions that you may make. Let’s take a closer look at what steps you can take to control your own pricing.
What is Pricing Power?
This economic term describes the effect of a change in a product price on the demanded quantity of said product. Your company’s pricing power is linked to the demand for your products or services. If you have a high level of pricing power, you can raise your prices over time and maintain your customers.
Who Has the Greatest Pricing Power?
It is no great secret that the Amazons, Apples, Wal-Marts and auto manufacturers of the world exercise a tremendous amount of power. Part of this considerable, and seemingly ever growing, power resides in the fact that the size of these companies now rivals and even surpasses many nation states. This grand level of power is unique in human history in many ways. Along with it comes the ability to exercise an almost god-like authority over suppliers.
Today, these ultra-powerful companies commonly dictate to vendors what prices they are willing to pay, and the quasi-monopolistic nature of these companies often leaves vendors with no choice to comply. In short, these 900-pound gorillas are telling companies both large and small exactly how much they will pay for a given number of bananas.
Step 1 – Providing a Branded Product or Service
If you discover that your company doesn’t have pricing power, there are steps you can take. One step is to produce a branded product or service. In this way, you are able to offer something of greater value than your competitors. Through having a branded product or service, it is possible to create a higher perceived value in the minds of not just the Amazons of the world, but in the minds of consumers as well.
Step 2 – Innovating
Another path towards achieving pricing power is through innovation. A great example of leading the way in innovation is Apple. While few companies have Apple’s almost ethereal resources, that is not to say that you cannot find ways to innovate within your own sphere or industry. Small innovations can often have an outsized impact and help a business stand out from a crowded playing field. Innovation that leads to patent production is an excellent way to gain a degree of pricing power.
Step 3 – Offering Exceptional Service
A third option for achieving a degree of pricing power is to provide what could be called “mind-blowing” service. By providing service that is truly a cut above what the competitors can match, your company is positioned to achieve pricing power. Providing your customers with something they simply can’t get elsewhere is a key way to setting a price that is more in line with what you desire.
There are many marketplace variables that your business can’t control. The trick is to evaluate your business, your business’s potential and the concrete and practical steps you can take starting today to achieve pricing power.
Copyright: Business Brokerage Press, Inc.
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