Business owners are always told they need to prepare in advance to sell their business, but why can’t they just up and sell it quickly? The short answer is that it’s unlikely to sell that way. Only 20% of businesses listed for sale actually sell, according to the Exit Planning Institute. Listing it is easy. Selling it is hard.
What actually makes a business part of the group that sells? A buyer is going to do some due diligence on the business to try to determine risk. The higher the perceived risk, the lower the multiple of EBITDA and thus a lower selling price.
What are some of the perceived risks? Small and lower middle market businesses often have an owner that is directly involved in the production and/or sales. The higher this “owner centricity” is, the higher the risk. An “owner centric” owner is very difficult to replace. Implementing a sales/management succession plan for the owner well in advance of a sale can mitigate this risk and allow the owner/seller to maintain value.
Owners with an exit/succession plan often find themselves in the 20% that successfully sell.
FPA Owner Transitions 