Selling their business upon retirement is for most small business owners a once in a lifetime experience, one that is the culmination of decades of hard work and dedication.

Often the seller will have a sum in their mind that they have to achieve for the sale of their business, irrespective of whether or not it is in fact realistic, ignoring a fundamental economic fact that the market determines what the sales price will be, not the owner.

Sometimes the figure is plucked out of thin air because it sounds nice. Think £1 million.

Or perhaps it’s what they might require to fund their retirement at a certain level.

Then again, it might be the result of research done at the fount of all knowledge. Google.

In truth, it doesn’t really matter where a ridiculous figure has come from, the problems truly commence when a broker is approached and they validate the owner’s opinion as to how much they will be entering retirement with in their bank account.

It’s even worse when the business itself is not truly sales-ready or perhaps not sellable at all, perhaps it is not even a business but rather it is a vocation for the owner, otherwise known as a job working for yourself.

Whilst many brokers will survive on the commission generated by a successful sale, there are plenty who charge hefty up-front fees and have little interest or incentive to see a sale taking place.

Those in the former category will not want to take on a deal that is unlikely to succeed, given the large amount of time that crafting a deal and hawking the business can take, so they are aligned financially with the seller, unlike the latter category.

So we have two possible scenarios here:

Firstly, a seller who is told by the broker that their business is worth nowhere near what they want it to be worth and is unlikely to get there anytime soon, if ever, even if certain fixes are undertaken.

Secondly, we have the poor mug who has fallen for the broker’s patter and writes out a cheque for a hefty five figure sum in the expectation of a very large payout in the coming months.

Our first seller will go away and ruminate, maybe speaking to another couple of brokers, talk to her accountant and dive into Google again to research selling a business. But this time doing it thoroughly and armed with the benefit of a reality check from an honest broker.

Our second seller now heads towards the iceberg full steam ahead, clouded by the red mist in the title of this blog, supplied in copious quantities by our dodgy broker.

Now, seller number one may still be affected by her self-generated red mist, in which case she will likely persevere with the original broker, whose honesty  she admires, and instruct him to try his best and push for the highest figure.

So the days turn into weeks , weeks into months and the months turn into a year and nobody takes the slightest sniff at the offering, so the agent gets the blame.

Naturally the agent will point out to the client that the asking price was too high so either it is reduced or relisted at “offers invited”. The savvy buyers will have been patiently tracking this business and at this point they can smell the blood in the water.

A suitor steps forward and your client is now their prey, as interest turns into due diligence that turns into legals then they go in for the kill with an offer that stuns your client.

The hoped-for £1.5m is no longer on the table, after all, things have been “discovered” or maybe they have not, but the buyer knows your client’s predicament. It’s looking more like £250,000.

Yup, that’s correct, a meagre quarter million, which to be honest is around half of the true value anyway.

What now? Take it and move on or reject it and soldier on?

Not the broker’s call….the client’s call.

Meanwhile seller number two has their business plastered around the internet like a rash and the broker will entertain all sorts of weird and wonderful suitors, often charlatans, without of course delivering a meaningful offer, but it’s not the broker’s fault is it?

They have done their best, promoting the business assiduously and bringing a stream of leads to your door. After all these chaps deal in quantity not quantity. By now the contract will have lapsed and our hapless business owner is back to square 1 minus a five-figure fee.

So where does that leave our seller?

Number one at least has a genuine offer but it is a tough call.

It could all have been avoided by taking the time to understand the process properly and more importantly understand that if your business is only worth x , the market will pay x , not 3x or x+y, in the absence of a truly strategic play or sooper-dooper whizzy IP that you hold.

Let’s face it, if you really want to get your hands on £3m to retire and your business is nowhere close to that figure you have to spend time and money to boost your bottom line in a sustainable manner or else accept the facts as they are.

There’s nobody else to blame – it’s your business and it’s your call.

So what’s the takeaway from this blog.

It’s simply this. Start planning your exit early enough to make sure your business realises its true potential and you can receive the magic figure you are fixated on, or maybe even more.

Get the right advice and bring in the right people but don’t forget that it takes time but it’s worth it if you have a decent business that just needs to get to the next level or easily remedy the things that make it unattractive, to let you realise your dream.

So if you fancy a chat, drop me an email or book a free call. What are you waiting for?