A business owner walked into our office a few months ago ready to retire.
On the surface, there wasn’t much to worry about. He’d spent more than 20 years building a respected company. The phone rang consistently, customers kept coming back, and there was more work than the team could keep up with. He had five employees who had been with him for years and a reputation that he was proud of.
From his perspective, he’d done what every entrepreneur hopes to do. He’d built a successful business, worked hard, and finally reached the point where he was ready to slow down.
So, we completed the valuation….and the number came in well below what he expected. Worse, we had to tell him we didn’t believe we could successfully sell the business.
Those are conversations we never enjoy having.
The business wasn’t struggling. So, in his mind, what’s the problem? The problem was that the business and the owner had become almost impossible to separate: The business depended almost entirely on him.
And, as we learned more, we discovered that two key employees planned to retire when he did. The employees who remained weren’t cross-trained, and no one was prepared to step into a leadership role. That creates an even bigger problem. A buyer wouldn’t just be purchasing a business. They’d be stepping into a role where every move depended on them all while trying to replace three of the people who knew the company best.
That’s a difficult story to pitch to a buyer. It’s even more difficult to convince a bank to lend on.
In the end, the business was worth more as a liquidation than it was as an ongoing company.
This story and many others we have like it, highlight something many business owners never stop to consider: Building a profitable business and building a transferable business are not the same thing.
For years, this owner focused on serving customers, taking care of employees, and growing the company. Those were the right priorities. But he never stopped to ask a different question.
“If I stepped away tomorrow, would someone else actually want to own this business?”
That’s really a different way of measuring success.
What a Buyer Focuses On
Buyers don’t purchase the last twenty years. They purchase the next twenty.
They’re trying to picture themselves stepping into your shoes. Can they keep your customers? Will your employees stay? Is there someone who can run the day-to-day operation while they get the lay of the land? Are systems documented, or does everything depend on the owner remembering how it’s always been done?
Those answers influence their willingness to buy just as much as the financial statements.
That’s why we encourage business owners to get a valuation three to five years before they plan to exit. Yes, it tells you what your business is worth today. More importantly, it explains why it’s worth that amount and what you can do to increase its value, improve its transferability, and make it more attractive to buyers.
When you can see your business through a buyer’s eyes before you’re ready to sell, you gain something far more valuable than a number. You gain a roadmap and the time to act on it.
Developing leaders, documenting processes, reducing owner dependence, and preparing a business for someone else’s ownership aren’t projects you tackle six months before retirement. They’re decisions you make over years.
A valuation isn’t just about putting a price on your company. It’s about understanding what you’ve built, identifying opportunities to create more value, and giving yourself the greatest number of options when the time comes to exit.
If you’ve never looked at your business through a buyer’s eyes, maybe it’s time. We’d be happy to help you see what buyers see.