Do you know that in survey after survey, the spouse of the business owner is the most sought after source of wisdom in their inner circle. You are the person they most like to talk over their issues about the business. You have influence and power. Your words have weight, whether you get acknowledgement for that or not.
I bet you also didn’t know that your spouse’s company is most likely un-saleable… meaning that despite the fact your family enjoys a nice lifestyle and ‘better than most’ income, your family may not ever get much more from that company than what you get in dividend income and salary now. Ouch.
How come? Because most business owners don’t know what they don’t know about what it takes to make a business attractive to the next owner. It’s not well-known information, in fact its completely hidden from most business owners because they, and their advisors don’t hang out with buyers and deal makers. Theirs is a rarefied world.
Owners don’t meet their future owner until they are sitting across the negotiating table wondering why the guy keeps lowering their offering price. Most owners attempting to sell lifestyle companies get a painful wake up call at that time, right when its too late to make the changes inside the business that would make it worth what they really want to sell it for.
A saleable company is one that will attract a premium offer from a buyer, turning you, your spouse and family into millionaires the day after you close the deal.
So what can you do? You can learn what it takes to make your spouse’s company saleable and then share your new knowledge and work on it together. But first you may want to know why so many owners think they will have no problem selling.
It’s Easy To Get an Exit Done Right? I Just Need a Succession Plan or an Exit Plan
Owners have been told by their accountants and lawyers that they need a succession plan. That’s only one-quarter of the puzzle. These advisors are just as ill-informed about what it takes to attract a buyer as everyone else. It’s not their primary area of expertise.
There are actually FOUR Steps required. Two of these steps are becoming well understood. The other two steps are the reason that so many business owners fail to sell.
Your spouse will need to do each of these things in a certain order. Plus you have to add one more step and this one is a whopper.
The important part for you though, is to recognize that each of these actions are different, not one and the same. They are set of sequential events.
Here is the correct order:
- Choose Which Fork You Will TakeWhat does this mean? It means you have to decide at least 2-4 years before you want to exit which outcome you want: to continue your Lifestyle business that is un-saleable and will eventually close. Or to switch gears and become a Wealth Generating business that becomes transferable and saleable to family members or employees or to external buyers.
- Make my business saleable. Finds and fixes the issues that make the business un-saleable and un-transferable and maps your course to make these changes personally and inside the business.
- Design a Succession plan. Puts your personal estate in order and organizes who will take over from you.
- Work with an Exit planner. Starts the process of putting the now Saleable company on a path to get a deal done so you breakthrough all the barriers to a successful exit.
There is no point in investing in any of these other actions until you come to terms with this first step. Seriously. I’ll explain shortly.
Why Don’t Business Owners Worry About Whether They Will Be Able to Sell and Why You, as the Spouse of a Business Owner Should Take Action Now
Let’s see why owners might be suffering under the weight of this confusion.
As a business owner, your spouse receives calls and letters from brokers and investment bankers regularly telling them they can sell their business. When your spouse get these calls, they have two conflicting responses:
- “Cool, if these guys are calling me, I could sell whenever I want. Good to know.”
- “If I get one more pitch letter or call nagging me to sell my company, I’m going to hang up. I’ll sell when I’m #$%@$ ready. Enough already!”
Big Waste of Time
I think brokers and investment bankers are shooting themselves in the foot with this marketing strategy. They are just earning a lousy reputation. Secondly, why would they want to represent a company that is most likely un-saleable?
Their marketing strategy is a serious waste of everyone’s time and energy. Never mind the massive disappointment that comes when an owner doesn’t get any offers or only gets bottom feeders because the company is not positioned to be able to sell and buyers know it… and owners don’t. And then the owner has to find the will and energy to go back into his or her business and keep running it without an exit in sight. And you, as their spouse will be needed for emotional support to recover from this humbling and energy-sucking experience.
Don’t Be Lured by False Hope
But worse, these marketing calls spread false hope to owners like your spouse and perpetuate the myth that they can sell when they want, for what they want. Why is this a myth? It’s kind of hard to get your mind around this but just because your spouse’s company is successful for you and your family, it is NOT positioned to be successful for the next owner. And buyers are acquiring the ability of the people left in the business (not your spouse) to produce growth. If they can’t see how they will get that growth, they are not interested in buying.
The statistics show that 90% of owners that try to sell without having taken all 4 steps, fail to find a buyer.
Do You Really Want a Return on Your Investment in Your Spouse’s Business?
So how do you make this critical decision as a couple to turn the company from Lifestyle Business into Wealth Generating Business and then make it saleable? You have to want that outcome for yourself, for your family, for your employees, for your customers and your local economy.
Imagine if your sweetheart has to close the business down in the not so distant future. Together you will witness it’s slow decline. That’s not an outcome that many owners can stomach. So your first step together is an emotional one. Your spouse built your business up to where it is today. Now you have to support him or her to start letting go emotionally, psychologically, and operationally. Yes, this work must start now, 2-4 years before that desired exit date.
If your significant others doesn’t start letting go now, then all the investment in succession planning and exit planning won’t pay off. Even when a buyer comes to call. Even when a broker brings a buyer. The fingers won’t work the pen to sign the deal. They are still too attached to what they have grown from scratch.
The offer won’t be what you had both hoped for because the work didn’t get done to make the company worth what you wanted to sell it for. So you’re both disappointed right from the beginning in the deal. You spouse is also up against the spectre of either working for the new owner or leaving the business with nothing meaningful and satisfying to go to that makes his or her heart sing.
Want a Better Future for Your Sweetheart’s Business?
If you don’t want the future you are currently heading to, a Lifestyle Business that is successful for you and your family, but not the next owner, learn how to get on the Wealth Generating path by reading How to Increase the Value of Your Business BEFORE You Sell