Sam Harrop is a very successful Business Coach and Mentor and is the author of two books, Getting Stuff Done and Small Business Big Exit. When Sam was last on my podcast, Episode #30 we talked about Getting Stuff Done, but today we're focusing on his second book Small Business Big Exit: How to make more money selling your business than running it.
Big Warning:
Even if you're not ready to sell your business right now you need to pay attention to Sam's advice because it will help you make a lot of money.
Sell When You Want
The worst time to sell your business is when you have to. Therefore the best time to sell is when you want to when you're in control.
Eight-four percent (84%) of small businesses listed to sell do not sell, and when they do sell, they sell for much lower than the business owner expected, usually 1.5 times earnings.
Introducing The 5P Framework
1. PURPOSE
You need to be clear about why you want to sell, when you want to sell, how much you want to sell for, and how much you need to sell for. When emotion goes up, intelligence goes down. Some business owners will walk away from a great deal only to find out two years later they made a mistake.
2. PEAK
The peak is about priming your business for sale and understanding why some businesses don't sell. It's also important to know where your business broker and business coach sit in the equation.
Business brokers make money on the sale. Therefore they will sometimes over inflate the price to get the listing, whereas a business coach will help you make the business more valuable.
Even if you're not ready to sell, you have a choice to make your business more valuable. A strategic sale is far more valuable than a forced sale.
It's important to know what your lowest offer would be and you need to have this discussion way before you start negotiating so you can keep it in perspective.
3. PRIME
Prime is about rapidly increasing the value of your business by looking at individual building blocks that give it value. Therefore the purchase price is determined by the profits (P) and a multiple of those profits. The multiple is made up of:
(A) Assets - both tangible and intangible
(C) Cashflow - operational
(I) Independence - the business is not dependent on the owner, team and suppliers
(FI) First Impressions - what does the business look
Sam refers to this as PACIFI, or pronounced 'pacify'.
4. PROMOTE
Promoting your business creates multiple buyers, and you only need two buyers in the market to push the price up. Do you know who your potential buyers are, now and in the future?
If you're speaking with a business broker, ask them how many businesses have the sold that are similar to yours, and find out of they are a sellers broker or a buyer broker?
5. PERFORM
Perform is about negotiating and structuring the deal, and also closing the deal. It's also important to make sure you do not drop the ball with running your business during the negotiation process because if the sale does not go through you don't want to lose value in your business.
Half the strength of the negotiation is being able to walk away.
Beware Of Spouses
When you're going into a business partnership, you need to remember you're also going into business with your partner's spouse, so make sure you have an agreement in place on how you're going to deal with problems when they arise and how you will dissolve the partnership if need be. Don't think it's always going to be perfect.
"Plan the divorce before you get married".
If you have any questions about this podcast episode, please send me an email at
Sam Harrop's website - www.samharrop.com.au
Other Freebies from Sam Harrop:
* Business Broker Checklist.pdf
* 7 Mistakes Booklet When Selling Your Business.pdf
Episode #30 - Getting Stuff Done with Sam Harrop
Episode #17: Drive Your Business with Jeff Peterson & Bill Davis
It's No Secret Business Conference: August 17th - 18th Cairns 2018
This year's theme is 'Communication, Persuasion and Influence'. David M Frees will be the Keynote Speaker for this event, and he is coming all the way from Pennsylvania, USA, and there will be eight other speakers over the two days. Bookings are NOW available, and for more details, please visit my EVENTS page (Strictly limited to 50 attendees). If you have any concerns making a booking please email me.
FREE DOWNLOADS:
First 16 Pages of My Book – It’s No Secret There’s Money in Small Business.
