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 (e.g. a big fat profit when they sell).

Unfortunately, what most small business owners 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:

• 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.

• 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:

    1.     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?

    2.     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? 

    3.     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. 

    4.     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

In working with hundreds of small and mid-size businesses Dr. Bob Roth has identified three things that successful owners almost always do . . . and that unsuccessful owners almost never do. Financially successful business owners:

• Buy or start a business that is right for them.

• Identify and make the 20% of potential business process improvements that contribute to building value (while not getting distracted by the 80% that seem urgent but will not contribute to building value).

• Take responsibility for managing their own purchase and sale transactions (they do not use a broker).

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 Coach^TM, 2) the ABC Exit Coach^TM and 3) the ABC Exit Strategy Simulation^TM.

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

• A accomplished serial entrepreneur

• A consultant to Fortune 100 corporations

• An adviser to hundreds of small businesses

• An educator, mentor and someone who cares

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

For more information please contact us - Click Here.

Dr. Bob Roth Launches BPI for Sales^TM

In response to current economic challenges, Dr. Bob Roth has launched BPI for Sales^TM. Utilizing his proprietary methods he is helping business owners increase cash flow and liquidity "the old-fashioned way" by reengineering their sales and marketing processes.

BPI for Sales^TM prepares cross-functional sales and marketing teams to improve the business processes that Promise, Produce and Deliver what customers want. Those teams make marketing make money and build a foundation for continuing business growth.

For information on BPI for Sales^TM - Click Here.