Most business owners think their business should be priced more than it's worth -- mainly because of all of their hard work over the years. But they have to realize there are certain economics and realities that dictate the price. Besides the various methods of business valuation, the cash flow ultimately must provide the new owner a return on cash investment, ability to service debt and a reasonable salary for the owner and/or manager. Unfortunately, too many business owners find major disappointment because the marketplace has not accepted their unrealistic asking price.
This pandemic is hard and it’s not fair. And certainly no one could see the scope of its impact coming. As bad as it is for a business, it can be even worse for others. The business owner has to do everything possible to find answers by being creative, determined and providing leadership. By contacting the SBA and the bank(s) for new loans or delays in payments, researching the internet to see what others are doing, using the resources of their association, considering new products or services, looking back at other ideas from the past, but leaving no stone unturned.
Read How to Thrive During and After a Crisis: 5 Small Business Strategies.
The days of the 5 and 10 year business plan are long over - everything is changing at such a fast pace. Business owners need to review their plan to determine what has already changed and forecast what could change - competition, technology, demand for the product or services of the business, etc. Plans must be updated and must be realistic for the foreseeable future.
Click here for free sample business plan formats.
Whether applying for a loan or selling the company, business owners must be prepared to disclose EVERYTHING. The business needs to look good -- in all areas. To not be disappointed, business owners must plan, address weaknesses, and be realistic in their expectations if they don't have solutions.
Click here for a brief list of items to help in planning.
Most retiring business owners expect that their financial needs will be met when they sell their companies. Unfortunately, that is not always the case. Business owners should have a business valuation performed by an independent professional and then create an "Exit Plan" to close the value gap if one exists.