I don’t mean a forced closure, or a “Going Out of Business” sale. Any time an owner sells at less than what they should have gotten, typically because the business wasn’t ready, it is a liquidating sale.

Here’s the rub: preparing the business for sale doesn’t mean you HAVE to sell. It simply means it’s “READY” to Sell. And like death and taxes, exiting the business is going to happen. Whether it is on your schedule, or somewhat unexpectedly. It could be down to health, family matters, maybe you have lost the mojo that built and managed it for so many years, or perhaps simply you are ready to slow down. Regardless. It’s going to happen.

You just have to decide if it’s going to be on your terms.

So what do you do?

First, understand whatever you get for the business will depend NOT on what you think it is worth, but what a buyer will pay for it. A buyer will look at your net, free cash flow before taxes (the EBITDA), and multiply that by a Multiple, that essentially is a combination of market forces and more importantly, the confidence a buyer has that the cash flow will continue (if not increase) after you have departed.

This is stated as:

Business Value = EBITDA x “The Multiple”

You need to look at every aspect of your business objectively and “de-risk” the potential issues that could cause the cash flow to drop.

Do that, and you’ll be able to sell on your terms, and for the business’ true value. Ideally you needed to do this yesterday, but better late than never. Even if you’re not thinking of exiting right now, that’s ok, you should still be prepared in case it’s out of your control.

Otherwise, it’s like playing Russian Roulette with your business. Not a wise move.