As always, I want to apologize in advance for my lack of writing skills should there be anything grammatically incorrect, but it is the principles and knowledge that I want to share.
Quite a number of months ago I wrote blog part one to “Rule of Thumb Not Always Practical (Part 1)”. I think now is the time to complete the article with part two. For the last several years I’ve heard about so many rules of thumb when selling a business that I often just smile when one is told to me.
When I’m told a “Rule of Thumb”, from an individual, it is sometimes with the emphasis that it anything outside the “Rule of Thumb” would be impossible to happen. But let me share the definition from Wikipedia, “The English phrase rule of thumb refers to a principle with broad application that is not intended to be strictly accurate or reliable for every situation.” So it seems that many individuals have put more certainty into the “Rule of Thumb” than even the definitions reveal.
I think the reason many business owners grasp so hard onto the “Rule of Thumbs”, that the business selling community has proclaimed, is often the business owner is looking for control over the sale of his business. I believe most of us look for “Rules of Thumb” when we are struggling to gain control over a situation that we understand very little. However, the problem arises when we stop at just learning the “Rule of Thumb” and fail to continue the education necessary to truly gain control over a once unknown. Only through deeper learning can we obtain the knowledge that makes it possible to make better decisions.
“Rules of Thumb” should come with a disclaimer, “Start Here Not Finish Here.” Knowing that buyers are typically more knowledgeable than sellers in many transactions means that now the hard part comes from the seller. How much time do they have to spend learning how to prepare and sell their company? Of course, that just depends, right? So, here’s my “Rule of Thumb”, spend at least 120 hours learning and working on high-level planning. Then spend another 80-120 hours prepping for eventual due-diligence once you are under two years away. But always revert back to the Wikipedia definition for guidance.
If after reading this you are still thinking of selling your business, but don't know what it's worth, if you should sell it or just need to be pointed in the right direction... contact me here http://www.austecbt.com/contact.html
John Hamel is the Managing Member of Austec Business Transitions, LLC. helping businesses optimize value relative to exiting their company.