Arizona Business Center
Consulting Group
ABC Home - Buying, Building and Selling Small Businesses

Will You Sell Your Small Business
For a Big Fat Profit?

Small business owners know that they are unlikely to make a big profit from the day-to-day operation of their business. What most hope to find is a pot of gold at the end of their ownership rainbow . . . a big profit when they sell. Unfortunately, what most owners actually do find at the end of their rainbow is some grim math.

The Grim Math

Buying or starting a business can be a tremendously profitable undertaking. That said, the grim math of small business predicts that, after years (possibly decades) of building their business, fewer than 10% of owners will be able to sell it for a satisfying price. This grim math is the result of the two factors that most owners do not get in touch with until their time to sell is actually at hand. At that time, they realize that:

    1. Their business is not worth nearly what they 
        have been assuming it is worth. The price that a 
        buyer is willing to pay is only half, or less than 
        half, of what they want and need.

    2. The costs of selling their business are going to 
        be far greater than they ever imagined (quite 
        possibly 40%, or more, of the total sale price).


As a result, many owners are forced to retire on a pre-tax income that is only a fraction of what they need in order to maintain their lifestyle. Here is a typical example:

  • A business owner assumes that his or her business is worth about $2.0 million. They are taking home $200,000 in salary, benefits and perks. After they sell the business they want to continue enjoying their $200,000 lifestyle. So, what happens next?
  • Next, the owner decides to sell the business for $2.0 million and invest that amount in bonds yielding, let's say 5.0%. Then they will live happily ever after. Right?

Wrong! Do the math. Two million dollars invested at 5.0% yields $100,000 per year, not $200,000. Getting in touch with that fact the owner may rationalize . . . "Oh well, I can live on $100,000 per year. That's not the end of the world." So, what happens next?

  • Next, the owner presents the business for sale and offers start coming in. Guess what . . . the best offer is $1.0 million, or one-half of what they have been assuming the business is worth. The income that $1.0 million dollars will produce at a 5.0% yield is $50,000 per year. This owner now faces the reality of having to adjust his or her lifestyle to an income that is one-quarter of what they are used to. If you think that is a tough deal, just wait. It gets worse.

  • Selling a business costs money (sometimes lots of it). First, there is a tax consequence. Then there may be a brokerage commission. And of course there are fees for legal and accounting and valuation services. And, to all of those expenses add the cost of pre-sale "paint up/fix up." Putting "lipstick" on the business can be very expensive.

  • The cost of selling a business can easily add up to 40% or more of the sale price. In this case, 40% of the $1.0 million sale price equals $400,000. Now, subtract that $400,000 from $1.0 million and the seller ends up with net proceeds of $600,000 (with which to finance their lifestyle for the rest of their life).

  • Hmmm, let's see . . . $600,000 X 5.0% equals an annual pre-tax income of $30,000. Ouch!

3 Keys to Buying Right, Building Value And Selling Well

Dr. Bob Roth has worked with hundreds of privately held businesses to support their owners in buying opportunistically, building value and, when the time is right, selling their business for a satisfying profit. Through this work he has identified three key things that most successful owners do . . . and that unsuccessful owners almost never do.

Successful owners:

1. Buy or start a business that is right for them, a business that is well aligned with their purpose, capabilities and bank 
    account. And, if they are buying an existing business . . . they buy it right.

2. Make the business process improvements that will contribute most to building revenue (which will build value).

3. Take responsibility for managing their own purchase and sale transactions (which eliminates brokerage 
    commissions).

At the Arizona Business Center Consulting Group we help small business owners do these three things by providing them with three services: 1) the ABC Business Buyer's CoachTM, 2) the ABC Exit Strategy SimulationTM and 3) the ABC Exit CoachTM.

The ABC Business Buyer's CoachTM

Selling a small business for a big profit is the last step in a process that starts several years, or possibly decades before the sale. The first step in that process is buying the right business and buying it right. The extent to which the last step will result in a satisfying sale price has a great deal to do with how well the first step was done.

The ABC Business Buyer's CoachTM helps owners identify business opportunities that have high potential for success. It supports them in making an opportunistic acquisition or in navigating a successful startup. Dr. Roth developed the ABC Business Buyer's CoachTM and personally shares it with business owners to-be.

For more information on the ABC Business Buyer's CoachTM - Click Here.

The ABC Exit Strategy SimulationTM

Most business owners recognize the necessity of an "exit strategy." At the same time, very few know how to develop or pursue one. And, unfortunately, most of the traditional methods that they read about or are provided by consultants do not work.

One approach that does work is the ABC Exit Strategy SimulationTM. Dr. Roth developed the simulation through his work with several dozen Fortune 100 organizations and hundreds of small businesses. He personally shares it with business owners and their teams through a two or three day simulation process that is highly customized to each owner's business and personal priorities. During the ABC Exit Strategy SimulationTM the owner will:

  • Determine what his or her business is currently worth.

  • Set a goal for what they want it to be worth when it is time to sell.

  • Explore alternative process improvement opportunities that have potential to make the business worth what they want it to be worth.

  • Simulate the financial impacts that each process improvement alternative may have on increasing the value of the business.

  • Prepare a simple action plan and budget for making the process improvements that will be made.

For more information on the ABC Exit Strategy SimulationTM - Click Here.

The ABC Exit CoachTM

Until recently, the process of selling a business has been a complex and mysterious one. As a result business brokers have been able to charge big commissions. Those fees typically amount to hundreds of thousands of dollars . . . sometimes to a million dollars or more. As a result, even owners who obtain a good price by selling through a business broker often walk away with a disappointing result.

Here in the 21st Century, personal computers, the Internet and other technologies have made it possible for a business owner to manage the purchase or sale of their business. Working as a team with their attorney, accountant and utilizing the ABC Exit CoachTM they can save 50% to as much as 90% of the cost of typical brokerage commissions.

For more information on the ABC Exit CoachTM - Click Here.

Dr. Bob Roth's Experience is
The Key to Our Ability to Help

We are often asked what differentiates us from other consultants and advisers in buying, building and exiting from privately held businesses. The answer is Dr. Bob Roth's personal involvement with every client assignment and the extensive mix of business experience that he brings to each as:

  • A former Fortune 500 Vice President

  • An accomplished serial entrepreneur

  • A consultant to Fortune 100 corporations

  • An adviser to hundreds of small businesses

  • An educator, mentor and someone who cares

This confluence of Dr. Roth's experience, personal dedication to working with every Arizona Business Center client and his proprietary ABC Business Buyer's CoachTM, ABC Exit Strategy SimulationTM and ABC Exit CoachTM processes are the Arizona Business Center's "secret sauce."

To view Dr. Roth's credential - Click Here.

For more information please contact us - Click Here.

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