Do you know the 9 M&A business owner statistics standing between you and financial freedom?
All business owners should know the 9 M&A statistics but don’t. But, when it comes to your exit or liquidity event, ignorance is anything but bliss. After all, you have one chance to get it right, and you better make it count.
As an owner of a successful business, you found a problem you were passionate about solving. Like you, the Deep Wealth system is our solution to a problem we are passionate about solving. We created the Deep Wealth 9-step roadmap to help us with the sale of our eLearning business, Embanet.
The Deep Wealth 9-step roadmap came from saying “no” to a 7-figure offer. Instead, I said “yes” to mastering the art and science of a liquidity event. Then, two years later, I said “yes” to a 9-figure deal.
My story should have ended after the sale with me on a beach drinking a pina colada!
But my journey took an unexpected twist when business owners reached out asking for help. My first inclination was to find an existing resource to help business owners. Unfortunately, the more I searched, the more frustrated I became. I found the ” solutions ” expensive and created by people who never had a 9-figure deal.
Once again, business owners are taken advantage of and are on the losing side of the equation.
My answer to the problem was to come out of “retirement” to help business owners capture the best deal. Let’s look at the statistics. But a word of caution. The statistics are anything but welcoming.
M&A Business Owner Statistics On Selling A Business
Knowledge is power. Knowledge shared is power multiplied – Robert Boyce.
Knowledge is power, but only if you know where to look and what to ask. When it comes to the statistics on selling a business, the numbers are anything but pretty. Let’s take a look at three statistics with an explanation that follows:
- Up to 90% of business owners have their wealth locked up in the business.
- When selling a business, 90% of companies fail to sell.
- Up to 75% of business owners who sell regret selling.
It should come as no surprise that the wealth of 90% of business owners is in their businesses. After all, you’ve put your time, effort, and hard-earned money into growing your business. As a result, you’ve made a difference for your clients, employees, and the marketplace.
Now, here’s one of many problems. Up to 90% of businesses fail to sell. Your “deep wealth” is in your business, but it’s hidden. So you have a big problem. Your financial freedom is dependent on the successful sale of your business.
Suppose you beat the odds and sell your business. The statistics aren’t any better. Business owners leave 50% to over 100% of the deal value in the buyer’s pocket. A staggering 75% of selling business owners ended up regretting the sale. Talk about seller’s remorse! Imagine the sleepless nights for the rest of your life, knowing you made a mistake that you can’t change.
While on the topic of failure, let’s visit business failures. Remember, success is as much about knowing what not to do as what to do.
What The Statistics Say About Business Failures (And It Isn’t Great)
Show me your preparation, and I’ll tell you your business future – Jeffrey Feldberg.
Let’s look at another three M&A business owner statistics:
- Over 65% of businesses fail after ten years.
- Cash flow issues cause 82% of business failures.
- Up to 80% of business owners never seek help when selling the business.
You may think you’re too busy to prepare for a liquidity event. So you tell yourself that you’ll prepare closer to the liquidity event.
Finding time to prepare for an event year away feels like it can wait for “tomorrow.” But, there was no “tomorrow” on the calendar.
If you can’t find the time to prepare today, you’re not ready for a successful liquidity event.
And while you’re waiting for “tomorrow,” let’s look at the first statistic. Within ten years, 65% of businesses fail. Unfortunately, many business owners assume that if they haven’t failed in the first five years, they won’t fail.
The statistics tell a different story. The number one reason why businesses fail within ten years is that they are not sellable.
The 65% failure rate for businesses is part of a one-two punch. The second statistic helps to explain the failure rate for established businesses.
A staggering 82% of business failures result from cash flow issues. It’s not hard to imagine. A growing business requires more employees and resources to sustain growth. Lack of cash suffocates growth and success. Indeed, today’s success contains the seeds of failure if you’re not prepared.
Last but not least, 80% of business owners do not seek outside help when selling the business.
How can you master a game you’ve never played before?
The answer to the rhetorical question above is that you can’t unless you seek help.
Why Preparation Is The Gift That Keeps On Giving
Plans are useless, but planning is essential – Dwight D. Eisenhower.
Preparation helps your liquidity event tomorrow and your business today. Preparing for a liquidity event also helps prevent a company from failing.
The Deep Wealth 9-step roadmap helps find and remove skeletons in the closet. For example, a lack of cash flow is a massive skeleton that, left unchecked, can destroy a business. But, once again, preparation is the gift that keeps on giving. When you prepare for your liquidity event, you find and fix the weaknesses of your business.
In preparing for your liquidity event, you’ll hire experienced advisors. Advisors can spot and help correct the deficiencies in your business. Of course, cash flow is at the top of the list of shortcomings.
You can remove the three statistics for business failure through preparation. Your advisors help you remove skeletons, including cash flow. So we can now say goodbye to this section’s second and third statistics.
With proper cash flow, you start to ensure your business is sellable. So we now say goodbye to the first statistic.
When I said “no” to the 7-figure offer from a wolf in sheep’s clothing, I said “yes” to fixing the problems with Embanet. The buyer gave me a roadmap for many skeletons in Embanet’s closet.
The Deep Wealth 9-step roadmap was both a direct and indirect result of the buyer’s feedback. The buyer’s roadmap was for his benefit at the expense of Embanet.
Reverse engineering the buyer’s roadmap is
the phoenix rising from the ashes. The Deep Wealth 9-step roadmap is the phoenix, and you’re the benefactor.
The Deep Wealth 9-step roadmap is strategies from the trenches that work. And speaking of buyers, let’s look at the next set of statistics.
Statistics On M&A Buyers You Really Need To Know
Statistics is the grammar of science – Karl Pearson.
Here are three statistics on M&A buyers:
- Over 60% of buyers are outside the US.
- Almost 80% of buyers look for businesses in adjacent markets.
- Over 33% of buyers want an earnout.
Business owners make a fatal mistake in believing they know the future buyer. But unfortunately, these same business owners make another deadly mistake. The fatal error is not taking specific actions since they “know” the prospective buyer.
You may believe your competitor, who has a management team, will buy the business. But, as a result, your business doesn’t run without you.
Enter the first statistic. Over 60% of buyers are not from the US. You have a better chance of winning the lottery than knowing the future buyer!
Your takeaway is that you can assume nothing. You can “know” that you don’t know the future buyer. Here are two questions to consider:
- What if the future buyer is a foreign entity that wants to buy a company that runs without the owner?
- What if your CEO and management team are more talented than the buyer’s team?
Your preparation has you assume nothing. You run the business covering all scenarios. Both deal certainty and enterprise value increase.
Almost one out of every four buyers look to adjacent markets for acquisitions. Your chances of knowing your future buyer are slim to nil.
It’s not your “job” to know your future buyer. Instead, look to your investment banker to find your prospective buyer. Take the time and effort saved in not searching for your future buyer to help avoid the third statistic.
The ninth statistic is crucial and deserves a section of its own.
How You Can Prepare Today So You Can Prevent An Earnout Tomorrow
Success occurs when opportunity meets preparation – Zig Ziglar.
The ninth M&A business owner statistic is all about earnouts. Almost one of three buyers want that dreaded “e” word, otherwise known as an earnout.
At Deep Wealth, we avoid an earnout like the plague and banish that word from our vocabulary. You may be screaming at the top of your lungs about someone you know who had a successful earnout. There are always exceptions. The “rule of law” at Deep Wealth is having no earnout.
Buyers often argue that an earnout helps close any gaps in business value. The argument sounds reasonable on paper, especially if the deal gets done.
What buyers leave out is that it’s less costly for the business to suffer if it means no earnout. But, at the same time, once the deal closes, you have no control over the company.
Buyers can and will add expenses that you feel are unnecessary. Your argument falls on deaf ears. Buyers may have a long-term plan whose timeline exceeds the earnout period.
Your unpaid earnout helps fund the long-term initiatives. While there are always exceptions, earnouts are usually not a win-win scenario.
Leave an earnout for the business owners who don’t prepare. The Deep Wealth 9-step roadmap helps you create a thriving and profitable company. Combine success with preparation, and you now have leverage in a liquidity event.
Nine ugly M&A business owner statistics paint a troublesome picture. The statistics help remove the myths of believing so that you know.
You now know that showing up unprepared is gambling with your future. You’re better off spending the time and money on a failed liquidity event by going to a casino. You’ll have more fun and be put out of your misery quicker.
The Deep Wealth 9-step roadmap comes from the trenches to help you defeat the statistics. But, as you already know, you have one chance to get it right with your liquidity event, and you want to make it count.
Don’t gamble with your future. Instead, turn to the Deep Wealth 9-step roadmap to tilt the odds in your favor. The strategies of preparation get the kind of results that you want.
So what do you do, and where do you start?
Please start with the first M&A business owner statistics and stay with it until it’s resolved. The exact Deep Wealth 9-step roadmap you’re following helped me capture a 9-figure deal.
Once you’ve addressed the first M&A business owner statistics, move on to the next one. Repeat the process until your preparation as you deal with all nine statistics.
Each of the nine M&A business owner statistics represents a fatal mistake you can prevent. The power of preparation is that it’s like a crystal ball. Preparation helps identify issues that you can remove before your liquidity event.
The simple narrative is a compelling one. The Deep Wealth 9-step roadmap protects you from nine fatal mistakes that rob you of success. Start your preparation today, and you’re the benefactor tomorrow and beyond.
Here’s to you and your success!
Your Biggest Raving Fan,