Are You Hoping To Sell Your Business? Get Ready Now | Forbes

Cheryl Connor Contributor ENTREPRENEURS 6/06/2015 @ 12:45PM

Several weeks ago I got the message every entrepreneur dreams of from Brian Meece, one of four cofounders of NY-based RocketHub, one of the first U.S. crowdfunding platforms.

“We’ve been acquired. $15 million. It’s happening,” he said. It took a minute for the news to sink in. RocketHub was founded in January 2010 and according to Inc. raised just $400,000 in its history. From $400,000 to $15 million in a little more than five years. A great accomplishment, especially for four individuals who are decidedly still very young. (I didn’t ask their ages, but none of them looks to be a day past 30, tops.)

Yes, between 85–95% of new businesses fail. But many are also succeeding. According to the BizBuySell Insight Report, there’s never been a better time to buy or sell a small business. Transactions reached record levels in 2014, with a total of 7,494 changing hands, an increase of more than 6% from the 7,056 transactions closed in 2013, which was the previous record.

Could there be an acquisition in your own future? Particularly in the Boomer sector, many are hopeful as entrepreneurs who are nearing retirement age look forward to passing the baton to a new generation. But if you’re hoping to sell your own business, now or in the foreseeable future, there are good, better and bad ways to prepare.

Brian Meece is one of four founders of the RocketHub crowdfunding platform that was recently acquired for $15M by EFactor. Well played. (Image courtesy of RocketHub.com)

I spoke with business broker Michelle Seiler-Tucker this week to gather insights on the things entrepreneurs can do to prepare. In addition to being an active broker known for closing 98% of her deals, Seiler-Tucker is the author of Sell Your Business for More Than It’s Worth, and is frequently quoted on the ways to capitalize on a business sale as either the buyer or seller.

She cautions sellers that 8 out of 10 companies will not sell—a daunting statistic in the face of millions of prospective baby boomers who are hoping to retire or sell. An owner who hopes to sell and fails is in an undesirable predicament as employees and customers sense an uncertain future. As an owner, if you are hoping to sell but you know your company isn’t worth what you need, the best strategy is to “hold and grow, then sell and go,” she says. Make the necessary preparations in advance for a favorable outcome before testing the waters in the transactional ocean.

For example, Seiler-Tucker recently counseled a couple that was working 12–16 hours a day from their home, burned out and turning away thousands of clients a year because they were unable to keep up with demand. They wanted to sell. But when Seiler-Tucker ran the numbers, the sum was too short to provide them with an adequate retirement. Already burned out, they’d have to go to work for somebody else after being self-employed for several decades.

Michelle Seiler-Tucker is an expert in buying and selling businesses. (Image courtesy of Seiler-Tucker)

Evaluate People, Product and Process

In this couple’s case, they had avoided the extra expense of hiring additional employees, believing that their prudence was fruitful. It was anything but; a company with no employees is dependent entirely upon its owners, Seiler-Tucker points out. If the business can’t survive without the owners, there is little or nothing to sell.

Immediately, she guided the couple to hire seven employees. Thankfully, the product was high quality and required no tweaking. But the process was also broken, as the company required more space to properly function. They moved into a 5,500 foot facility. Within 90 days, orders grew five-fold. (As a note, a business will require a significant line of operating credit to surmount the hurdle of acquiring space and people to sustain growth, even in cases where the growth occurs very quickly. A good relationship with a bank or funding partner would be vital within this strategy as well.)

In the case of this tired couple, the business was quickly revitalized. Not only could it operate without them, it was now producing sufficient revenue to put it on a direct path to be worth the sum they require—although now that the company is running smoothly, the couple is in much less of a hurry to sell and retire.

Build a Plan

“If your company is currently worth $400,000 but you need $5 million to retire in 5 years, you need to reverse engineer the process required to get to your goal,” Seiler-Tucker says. “Without a specific plan, the company will continue to wander along and the goal of selling at an optimal price will be gone.” Moreover, as you prepare for acquisition, in addition to ensuring the employees are willing to stay and your company is able to continue without you, be certain that you have built a strong and sustainable customer base, that your brand and reputation are solid, and that your financials are in impeccable shape.  As others have also advised, a buyer may be willing to restate your books if they have to, as long as you present them with a solid customer base, a high quality product and a vibrant strategy for additional growth.

So back to my friends at RocketHub—I asked Meece to tell me what went well in the acquisition process, what surprised him, and what his top words of advice would be to other entrepreneurs. So far, two months into the acquisition by mega-firm EFactor, the team is still smiling, buoyed by the opportunity to serve 1.5 million additional entrepreneurs.

“We set out to succeed on both the social and commercial levels,” Meece says. “Experiences such as speaking at SXSW and being invited to the White House [the team was instrumental in influencing new SEC guidelines for crowdfunding] have exceeded our expectations from an emotional standpoint.”

His advice to others?  “Learn to obsess about ways to add value to your customers,” he says. “‘How do we add value?’ is the question our entire team was asking each other on a daily basis.”

“It led to breakthroughs, including our partnership with A&E Networks, that are bringing our community to a mainstream audience,” he said. Post-acquisition, RocketHub will carry on while getting more customers from EFactor. Conversely, EFactor’s suite of resources prepares startups better for the success they hope to obtain on RocketHub.

A win/win. As Seiler-Tucker notes, of the 27 million businesses in the U.S., “at any given time, 25% are for sale.” In the post-recession economy, acquisition levels will likely continue to climb. The moral of the story is clear: If you are hoping to achieve a successful sale in your future, now is the time to prepare.

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For additional information regarding Florida business sales, acquisitions and valuations, please contact Eric J. Gall at Eric@EdisonAvenue.com or 239.738.6227. Also, visit our Edison Avenue website at www.EdisonAvenue.com or my personal website at www.BuySellFLbiz.com.