9 Lessons Learned From Failing To Sell My Business

Have you ever wanted to sell your business, but were unable to do so because it wasn't sellable? I've been there. In this article I am sharing the 9 lessons learned from failing to sell my business.

Many entrepreneurs dream of selling their businesses for a substantial profit, but not all businesses successfully sell. So in this newsletter, I'm sharing crucial lessons from failed exits and strategies to make your business irresistible to buyers.

9 Key Reasons Why Businesses Fail To Sell

Selling a business isn't just about setting a price. It's about making it valuable to potential buyers. Here are key steps to prepare your business for sale and ensure its success with its new owners:

1. Build a Company Brand, not just a Personal Brand
2. Establish Your Unique Niche
3. Be Independent, like Switzerland
4. Can it Still Grow?
5. Measure How Happy Your Clients Are
6. Don’t be that S.P.O.C. Owner
7. Acquire Assets and Develop IP
8. Revenue is Silver, Recurring Revenue is Gold
9. Let it Flow (the Cash)

Before we delve into each of these steps, remember this. "The best time to sell your business is when you don’t have to sell it." Nathan Hirsch, founder of trioseo.com. He sold Freeeup.com in 2019.

If you want to sell smart, you should time your million-dollar business exit.

Step 1: Build a Company Brand, not just a Personal Brand

Clients love to buy from people, and your first clients will buy from you as the owner. A personal brand is great for quickly gaining traction for your business. However, when your business matures, it becomes a risk and a liability when you want to sell it. Your business should be able to operate independently of you.

"Another advantage is that Google appears to favor real businesses, rather than personal brands. This observation is based on a recent algorithm update, where personal brands experienced significant traffic losses, in contrast to companies that provide tangible products and services" - Georgi Todorov, Founder of Create & Grow.

Tip: Remove your face from client work, marketing, and sales sooner rather than later, as this transition takes a lot of time.

Step 2: Establish Your Unique Niche

When a part of your business is active in a niche market with little competition, double down on that market. This is where you have better control over pricing and customer acquisition. Both of these things are highly valued by a buyer.

Step 3: Be Independent, like Switzerland

If your business depends too much on a single client, supplier, or employee (this could be you as the owner too), it is risky for buyers. Try to diversify your business and avoid being too dependent to increase long-term stability.

Advice: Once a quarter, review where your revenue is coming from and your contracts with your suppliers (make sure you have contracts!), to minimize risk and ensure stability.

Step 4: Can It Still Grow?

Buyers like businesses that have growth potential they can realize. Demonstrating this potential can make your business attractive to acquirers.

Suggestion: Regularly think about potential growth areas: a complementary service your clients would want to buy from you, a new geography you could service, or a similar group of clients you could help. The point is to know where growth is possible, rather than you going after that growth (because a buyer will have the leverage to do that).

"If you can demonstrate how you have leveraged your existing assets to generate consistent cash flow and profit, then a prospective buyer will have certainty about buying your business." M&A expert Steve Kilberg adds.

Step 5: Measure How Happy Your Clients Are

Satisfied clients talk about you to their friends, colleagues, and family. It guarantees repeat business and it’s free marketing.

Advice: Make sure you track how happy your clients are. Net Promoter Score (NPS) is a simple system to implement. Buyers love a good NPS, because it keeps marketing costs very low.

Step 6: Don’t Be That S.P.O.C. Owner

If your business can't operate without you as the owner, it's not sellable. Address the issue of being a Single Point Of Contact owner through hiring, delegation, process-building, documenting (have SOP’s for everything, especially how your business does sales on repeat) and automations (through software tools).

Tip: Take 4 weeks of holiday and see what doesn’t get done in your business. That’s where your work is as the owner. And, taking time off is great practice for your post-exit life!

In 2014, Caitlin Pyle started Proofread Anywhere. The business quickly expanded, generating up to $300,000 in monthly revenue. In 2022, Pyle felt it was time to move on. With a lean team of just the CEO and six contractors, she sold the business for $4.5M. To her, it was the hiring of a CEO that led to her big exit.

Step 7: Acquire Assets and Develop IP

Intellectual property (IP) and assets increase a business's value. Build it, document it, protect it, value it.

Step 8: Revenue is Silver, Recurring Revenue is Gold

Recurring revenue models, like subscriptions, provide regular cash flow and make your business attractive to buyers.

Tip: When I got my business valued, it was a powerful lesson to realize that the mere 15% of our revenue which was recurring was valued much higher than the 85% of our revenue which came from one-off projects. Recurring revenue is a game-changer if you want to sell for maximum value.

"The main reason recurring revenue is valued at a higher multiple is due to the guaranteed revenue each month, or payment cycle. A prospective buyer then has ‘confidence’ in the stability of the business, therefore it’s worth more." Steve adds.

"During due diligence, the buyers cared about recurring revenue, the quality of our team and client retention" Nathan adds.

Step 9: Let it Flow (Cash)

Good cash flow and profit are important for a healthy business. If possible, get paid upfront and all the time. Cut expenses. Have books in order. Build a diversified client base (see step 3). Sell, sell, sell, on repeat.

Advice: Multiplying your profit is the most common technique to value a business. So make sure your profits shine bright.

How to Make Your Business Attractive to Buyers

As a small business owner, I had to improve how my service business was run in order to make it sellable. The 3 key points I got from conversations with investors and buyers were these:

1. Great profits and cash flow, but (in comparison to one-off payments) there’s not enough recurring revenue.
2. Strong and loyal team, well-documented process, and lots of automations to run the business effectively. But marketing is too dependent on the owner (me, my personal brand was driving most of the traction). If you want to sell your personal brand, here’s how you create a 7-figure exit plan.
3. Sales is too inconsistent. We were running a launch model, so we had big weeks with tons of revenue coming in, followed by dry months. Buyers saw this as risky and wanted to see a repeatable, consistent, proven, evergreen sales process.

By working on these 3 key points, I multiplied the value of my business and got it exit-ready.

Your Turn: The Sellability Challenge

Here's a challenge for you: Assess your business:

• Which of the 9 steps have you mastered?
• Where can you improve?

Use this information to make a plan to prepare your business for sale and improve its daily operations. Remember, every step you take to improve your business's independence and marketability increases its value.