Did you know that around 2/3 of small businesses never sell and are closed down when the owner retires?
And of those that do sell, the average sales price is about 1/2 of what the owner thinks it's worth?
Add to that the fact that most business owners have the vast majority of their financial assets tied up in their businesses, and the prospects for the average owner to ever retire comfortably are slim.
According to Christopher M. Snider, President and CEO of the Exit Planning Institute (EPI), 85-90% of the net worth of the average business owner is tied up in their business, yet "57% of respondents to their survey stated that lifestyle is not dependent on transfer of ownership of the business." That's called denial.
And it's getting even harder to sell because so many Boomers want to sell to retire, but most haven't kept up with changes in technology.
That could end up trapping you in your business.
The business world has changed drastically since many of you started your businesses. It's a different world now, but I know from my over 20 years of experience in the internet industry that most of you haven't changed with it.
You've been too busy running your business to even think about it, and that presents a big problem:
Millennials and even other boomers who are more tech-savvy don't want to buy a business that isn't positioned to be competitive for the future. They also don't want to buy a job, and incorporating technology wisely will help the business rely less on you for day-to-day operations.
The plethora of affordable, readily-available online tools that can streamline your business means that today's buyers expect those tools to be integrated into your business. If they're not, the business is automatically worth much less. And if a buyer has to put too much work into modernizing your business, they may as well start one from scratch.
Think in terms of houses: an older home with an updated kitchen and bath will sell faster and for more than the same home with outdated décor, fixtures, and appliances. And at the bottom of the barrel is the fixer-upper that needs a high investment of time and money to bring it up to par structurally.
Don't let your business be like that fixer upper that ends up either being torn down or sold for pennies on the dollar. The good news is that you don't have to be like the average small business owner.
Real life example:
In 1997, I started working with a business that was on the verge of bankruptcy. In about 2 years I was able to turn it around for successful sale at 20x investment – and the business wasn't even for sale when the buyer made an offer!
How did I do it? I developed an online store for existing products, created a new recurring revenue stream through a membership-based service, and enhanced customer service by developing an industry-specifc search engine that also opened up a platform for ad sales.
Remember, this was when Google was a startup, many people had never heard of Amazon (but we were already selling on it), most people weren't online yet, and many highly respected professionals still thought the internet was a fad.
The business wasn't a technology business. It was a traditional, information-based business, but coming up with solutions to address real problems the owner had automatically opened up opportunities for additional income and effciency.
If you begin preparing now, before you're ready to start trying to sell, you have time to start learning to think like a Digital Native, someone who grew up during the time of widespread adoption of digital technology.
You can anticipate the systems and processes that would be worth the most to potential buyers, and implement those in your business. You may even think of new revenue streams made possible by the internet.
An outstanding bonus is that your business can also become more proftable and easier to run while you still own it, freeing you up to work less and start easing into your retirement before you actually sell.
Don't make the mistake of thinking this is a pipe dream. The value and marketability of any business can be improved with strategic use of the web.
I know you can do this! The key is to change your mindset.
Starting right now, you have to learn to think like a Digital Native. See your business through their eyes and the value will follow.