Independence Day is a day to celebrate those quintessentially American values like life, liberty and the pursuit of happiness. While we don’t hold a monopoly on entrepreneurship in this country, both the dream and reality of small-business ownership are firmly embedded in our national identity. The U.S. is still a place where you can start small and finish big.
The point at which you decide to sell a business and when you start one actually have several things in common, including the “why” of the whole endeavor. As business owners begin thinking about their exit they often find themselves psychologically back where they started, wanting more of one thing: Freedom.
Time: The Original Small-Business Freedom
The two types of freedom most often associated with small-business ownership are financial freedom, and freedom over your own time. For many of us, it’s the latter desire that pushes us to take the entrepreneurial leap in the first place. In short, it starts with wanting to be your own boss.
That’s how it started for me. I spent over a decade working in corporate America — mostly at wireless telecommunications companies — before my husband and I launched our first business in 2003. My tenure in the wireless industry was marked by a flurry of historic merger and acquisition (M&A) activity. I was laid off as a result of two such acquisitions. I also got laid off from a VC-backed internet startup in Seattle when the dot-com bubble burst in 2000. That makes a grand total of three times I was given a thank-you, a severance check, and a cardboard box for my personal belongings.
When I became a small business owner, part of my motivation was to never again feel like someone else was controlling my destiny. I wanted the freedom to choose my own hours, work from anywhere, and take a vacation whenever I damn well pleased. (Truth be told, I also saw most corporate cultures as incompatible with motherhood — a fact that seems little changed in the two decades since I left.)
Freedom Comes With a Price
Entrepreneurial freedom, however, can be more elusive than simply being your own boss. Fast forward a few years and many of us find that “living the dream” of small-business ownership comes with several attendant nightmares. Instead of being stuck in a corporate job, we can find ourselves trapped in our own business. Who among us hasn’t wanted to fire ourselves — or quit — on more than one occasion, knowing full well that we can’t?
The liberties associated with small-business ownership come with steep costs that include financial risk, legal accountability and ultimate responsibility for…everything. Most business owners confess to working more hours for themselves than they ever worked for an employer. It may be years before you can take a two-week vacation from your business. And even if you’ve achieved the holy grail of operational irrelevance as an owner, it can still feel like the business has a hold on you no matter where you go.
Selling: The Time vs. Money Trade-Off
Selling a business often comes with another liberty that can take years to fully achieve: Financial freedom.
If you want the biggest possible payday when selling your business, be prepared for a sprint to the finish. Getting top dollar from the sale of your business requires intentional pre-sale planning and preparation, (we recommend 6 to 36 months depending on your situation). If you’re relying on the proceeds from a sale to fund your retirement, it can be well worth putting your freedom on hold a bit longer to make sure your business is sale-ready.
Keep in mind that there can be a trade-off between time and money when it comes to selling your business. If you want freedom over your time ASAP — i.e. a quick sale with little to no preparation — it may cost you in the form of a lower business valuation and ultimate selling price.
In one of the great ironies of entrepreneurship, freedom is typically the biggest motivator for both starting and selling your business. No matter how successful they become, most entrepreneurs eventually long to be free of the constant worries and pressure associated with ownership – burdens they have gladly borne, but are ready to pass on to someone with new energy and ideas. You’ve come full circle, back to wanting control over your time and what you do with it. You’re also ready to cash in on years of hard work and enjoy complete financial freedom, possibly for the first time in your life.
When it comes to business ownership, the freedoms gained are often worth the fight, the risk, and the sacrifice. When you think about leaving your business, consider the two types of freedom you’re after: Financial freedom, and freedom over your time. Does one take priority over the other? Are you willing to delay a sale in order to get more of both? If not, what trade-offs are you willing to make?
Regardless of your timeframe for selling your business, start planning today. The best way to sell a business is to begin the process well in advance of wanting to sell. In the meantime, there is absolutely no downside to owning a sale-ready business.
Do you have questions about selling your business? The advisors at Allan Taylor & Co. are ready to start the conversation when you are. Reach out today.