Tuesday, December 21, 2010

The results of an unscientific study (my experience) lead me to believe that 80% of small businesses need to tell a "story" to get a buyer seriously interested. What do I mean by a story?

Every business needs to describe their operations, uniqueness and qualities just like they explain their product or service to their customers. What I mean by, "tell a story" is they have to explain why the business is worth more than the financial statements indicate the company is worth.

The usual suspects of why are:

1. Too many personal, aka lifestyle, expenses run through the business.

2. Too much money pulled from the business leaving a weak balance sheet.

3. Lack of attention to margins and expenses.

4. Poor condition of the assets (they've been run into the ground and it's up to the buyer to spend the money to replace them).

5. No business or marketing plan, which means what has been done may not be sustainable.

6. Poor culture (aka poor work ethic); in other words, when an owner says, "We don't work too hard here" the buyer realizes it will be hard to get the employees out of their lazy habits to help grow the company.

7. Dependency on the owner for too many things.

Take care of the above, think big and look at the long-term benefit and instead of explaining why someone should pay more for your business (than they want to) you'll be having buyers offering more than you imagined.

About John Martinka

Over the last 15 years Mr. Martinka has written over 200 articles, authored a workbook, assisted on over 100 buy-sell transactions and spoken to thousands of people on the subjects of buying, selling or growing small to mid-sized businesses. Some of his related articles and speeches include:

• The Seven Deadly Sins of Business Buying

• Non-Financial Factors Influence a Company's Value

• How to Sell Your Business for What you Thought When Other People Can't

• Growth by Acquisition is the Fastest, Least Painful Way to Grow

• An ACTION? Plan to Sell Your Business

Mr. Martinka can be reached at 425-576-1814 or at john@johnmartinka.com. Please follow him on his website at www.partneroncall.com/johnmartinka, his blog www.johnmartinka.com, and via Twitter at http://twitter.com/johnmartinka He is available to speak to and write for associations and media.

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