I’m elated to share this exciting news with you: I have just SOLD my very first retail startup!! A business that I built from scratch almost three years ago, and that I worked tooth and nail to make a success. If I would have known the sheer magnitude of work that goes into building a brand new retail venture, I can honestly say that I would have have chosen an easier path. I think sometimes it’s best not to know how difficult something is going to be. But the store now has a wonderful momentum with brand new owners, and I’m very proud to look back on this creative venture as a beautiful piece of art work that lives within the fabric of a community. It’s also hugely empowering to know that I have the ability to transform an idea into a tangible reality.
A business mentor of mine once told me that selling a business is just as much work as starting a business. At first I didn’t believe him; starting a business from scratch is SO much work. How in the world could selling a business compare to that? Doesn’t someone just come along with an offer, sign some paperwork, and then take everything over? Um, not quite. As gruelling as building a brand new business can be, preparing a business to be sold can be just as much work. This is especially true if you have a young business (which I did) and if your business wasn’t specifically built to sell (which mine wasn’t). My journey towards selling my business was such a massive learning experience for me that I wanted to share the top 7 lessons I’ve learned about how to prepare your business to be sold.
1. Have An Exit Strategy
Probably the most important lesson I learned is to begin a business venture with an exit strategy in mind, and to work towards it from day one. Now, if you’re like me you’ll read this and think – “I don’t need an exit strategy – I’m doing what I love, and I want to do this for ever and ever.” Well, take it from me. Life is full of surprises, and one day (possibly sooner than you expect), you might want to change directions. Starting a business with an end game in mind will allow you to tailor your decision-making according to how an outsider would view the quality of your business. A good business means that no one person is ever indispensable – the operations should be so clearly laid out that anyone could walk into it and take it over at any time. This is part of having an exit strategy – working towards building a turnkey operation where anyone can take over any part of the operation at any time.
2. Pay Yourself
If ever you want to sell your business, you have to pay yourself. If there was ever a conversation stopper it would be telling a potential buyer that the business doesn’t pay you (its owner) – the most important person in the entire business. No matter what explication you give – like you could have paid yourself, but you wanted to save money; or you DID pay yourself under the table; or you paid yourself in product and equipment etc, etc. – the conversation just won’t go well. Trust me. Paying yourself a decent salary – consistently, on the books – is pretty much mandatory in order to prove that you have a viable business for sale. And if the business can’t afford to pay you, then it’s probably a good time to have an honest look at what it is that’s going wrong, and how you can work towards fixing it.
3. File Taxes Accurately
Let’s be honest. Numbers can be manipulated to say just about anything. It’s so easy to fool yourself into believing that your business is doing better than it is, or else to hide your profit in order to avoid paying taxes. But both strategies will work against you if you’re trying to sell your business. On one hand, distorting the truth will make it harder for you to face the harsh realities of your finances – a reality that can provide crucial insights into how to improve your business. On the other hand, hiding profit will work against you when you go to sell your business – a potential buyer wants to know that they are investing into a successful and profitable business. Creating an accurate financial portrait of the business allows you to see the business as is – weaknesses, and all. And seeing the faults in your finances is a good thing. It allows you the chance to correct the problem – are the sales low? are the margins low? are your expenses too high? Distorting the truth about your finances might help you in the short term, but will only hurt you in the long run.
4. Sell Your Concept
Anyone can hang a shingle and start a business. That’s why selling a business can be challenging – especially when it’s a young business that has yet to prove itself in the market and stand on its own two feet. Understanding your concept is crucial in order to prove that your business unique, difficult to replicate, and worth the investment. It’s also a good way to understand exactly what it is your selling – are you selling drinks or an atmosphere? workshops or a community building experience? products or a lifestyle? Knowing and understanding the concept behind your business will help you to better sell your products to your customers, and your business to your buyer.
5. Maintain Meticulous Sales Records
Sales are the number one way to prove the viability of your business. If the money is coming in, then the business has a good chance of succeeding. Sales are the lifeblood of the business, and if there’s one way to impress a potential buyer it’s by understanding your market and knowing your clientele. Maintaining meticulous sales records will allow you to understand exactly which products and/or services are yielding which sales, and over the course of a few years, the trends in the data will start to show the viability of the business in terms of where the money is. This information will help a prospective buyer understand the true potential of the business, and to make projections based on the data collected. Since my business was very young (especially by retail standards) maintaining meticulous sales records was a crucial factor in being able to sell it.
6. Keep Your Cool
Oh my this one is important. A business owner will always value his or her business more than anyone else, and may even form an emotional attachment with it that others just won’t understand – especially a potential buyer. Therefore, having your business ripped to shreds by a buyer or investor looking to dissect the financials, expose the flaws, and tear apart the smallest inconsistencies in your paperwork can be heart wrenching. Don’t they understand the 80 hour work weeks you invested? The sweat equity? The creative vision? The sleepless nights? Well… no. A buyer’s perspective usually takes a hard knocks approach through the lens of worst case scenario. And the reality is that none of it is personal. It’s not a commentary on you as an entrepreneur or you as a person. It’s purely business, and the sooner you understand that, the easier the entire process of selling a business will become. Having an emotional reaction to a buyer doing his or her due diligence can be destructive and can even sour a potential deal.
7. Be Ready to Walk Away
Sometimes no matter how much you want a deal to work out, you have to accept that it’s just not meant to be – and you have to be ready to walk away. This is an exercise in boundaries. It’s about knowing your bottom line, and sticking to it no matter the outcome. I myself am terrible at bluffing. I pride myself on being honest, and emotion is usually written all over my face. If I’m happy, then you’ll know it; and if I’m angry, then you’ll definitely know it. There’s no way I could pit two potential buyers against each other in order to manipulate someone into raising their offer. It’s just not part of my DNA. But I do believe in mutual respect and having healthy boundaries, and I also believe in setting a bottom line and sticking to it no matter the outcome. If someone can’t meet my bottom line, then it’s clearly time to walk away from the deal.
So why in the world did I decide to sell my beautiful business that was a tremendous amount of work to get off the ground, and that I loved with all my heart? Well, this little angel here had more than a little to do with it. Once I found out I was pregnant, my entire perspective on where my life was heading started to change, and running a retail operation quite frankly felt like a major distraction to the most important job I’d ever have: motherhood. And with my retail operation now sold and in good hands, I’m elated to be spending more time getting to know my brand new little man.
I’d like to leave you with a photo journey through the birth of my very first store: from the builing of the walls, to the installation of a massive log bar, to the unpacking and stocking of countless pieces of equipment and inventory. If I were paid $10 for every hour invested in this project, I would be a rich lady indeed. Goodbye La Forêt, it’s been swell. I think I deserve a margarita.