3 Paradox When Selling a Business in Singapore

Mac
Jun 22
5 min read

Would you choose the red pill or blue pill?

As a business owner in Singapore, you take significant financial risk, poured your heart and soul into building something remarkable. Your business is a testament to your vision, resilience, and hard work. So, when the time comes to consider selling, it's natural to be caught in a unique set of dilemmas – a paradox, if you will – that often prevents owners from taking timely action.

At Fey Day, we've observed this phenomenon countless times. Business owners in Singapore and Malaysia, often find themselves wrestling with conflicting thoughts and emotions. Understanding these paradoxes is the first step towards a successful exit.

Paradox 1: The "Peak Performance" vs. "Ready for Sale" Conundrum

You've worked tirelessly for years to get your business to its peak. Profits are soaring, operations are streamlined, and the market is responding positively. Naturally you think, "This is the perfect time to sell!" And while a healthy, thriving business is undoubtedly attractive to investors, there's a subtle trap here.

The Lure of the Ascent: When your business is excelling, the natural inclination is to continue riding the wave. There's an excitement in growth, a desire to see just how much further you can take it. This can lead to procrastination, pushing the "sell" button further down the road.
The Plateau or Decline: The market is ever-changing. What's "peak" today might be a plateau tomorrow, or even the start of a decline. Disruptive technologies, shifts in consumer behaviour, change in government policies, new competitors – any of these can impact your business's trajectory. Selling when your business is performing well but also when you have a clear plan for your exit is crucial. Waiting until external factors force your hand often results in a less favourable sale.

The Takeaway: The optimal time to sell is often when your business is strong, but before you're emotionally exhausted or external pressures dictate your timeline. It's about proactive planning, not reactive selling.

Ask yourself these 2 questions:

Q1: Are you in a stronger position to negotiate when your business is growing or declining?

Q2: If you are an investor evaluating 5 different businesses options, how would you prioritise the choices?

Paradox 2: The "Indispensable Owner" vs. "Buyer Appeal" Dilemma

You are the heart and soul of your business. Your knowledge, relationships, and daily involvement are what make it tick. But this very strength can become a weakness when it comes to selling.

Your Value is Your Burden: Buyers are looking for a business that can run smoothly, or at least transition effectively, without the owner's constant presence. If your business is overly reliant on you, its perceived value to a potential buyer diminishes significantly due to keyman risk. There is always a pressing concern about knowledge loss when the owner transit out of the business.
The "Unsaleable" Business: Owners who are deeply embedded in every aspect of their operations often struggle to detach. This can make it challenging to present a business that functions independently, making it less attractive to buyers seeking a manageable investment.

The Takeaway: Start preparing your business for sale long before you're ready to list it. This means delegating responsibilities, documenting processes, and building a strong management team (2nd layer). The more your business can operate without you, the more attractive it becomes to a wider pool of buyers, and the higher its potential valuation.

Ask yourself these 2 questions:

Q1: If you are to go on a vacation for 3 weeks, can your staff hold the fort without your involvement? (Or are you required to check your phone daily?)

Q2: Do you presently have a 2nd layer management to take over your role when you sell your business in Singapore one day?

Paradox 3: The "Future Potential" vs. "Current Reality" Valuation Gap

You see the immense potential of your business – the untapped markets, the innovative products on the horizon, the exponential growth just around the corner. Buyers, however, are primarily focused on current and historical performance.

Valuing Vision vs. Verifiable Data: While your vision is inspiring, buyers are driven by financial realities and verifiable data. They'll scrutinize your balance sheets, profit and loss statements, and cash flow to determine a fair market value. When buying a SME business, investors are buying what it is presently, not solely what could be.
Overvaluing Your Sweat Equity: It's natural to attach significant emotional value to your business, often translating into an inflated asking price in your mind. This "sweat equity" is invaluable to you, but it rarely translates directly into a higher valuation for a buyer.

The Takeaway: Work with a professional business broker in Singapore to obtain an objective and realistic valuation of your business. Understanding its true market value based on tangible assets and performance will help manage your expectations and prevent lengthy, unproductive negotiations. It’s quite often that business owners overvalued their business, and as a result, their business remain unsold for years..

Ask yourself these 2 questions:

Q1: If you are investor buying a business in Singapore, how many years are you willing to wait before you recoup back your initial investment?

Q2: If you are a business acquirer, how would you view a business owner whose selling price requires more than 5 years to recoup the original investment?

The True Cost of Inaction

These paradoxes often lead to one critical outcome: inaction. And inaction, when it comes to selling a business, can be incredibly costly.

Missed Opportunities: Contrary to what most SME business owners think, suitable buyers don’t appear every day. If you missed out a suitable one, it may take you 1 to 2 years to come across another suitable buyer.
Value Erosion: As mentioned earlier, a thriving business can quickly plateau or decline due to unforeseen circumstances. Delaying a sale can directly impact your business's valuation. Sometimes, the valuation differences can be as much as 50%!
Burnout and Regret: Carrying the weight of a business, especially when you're ready to move on, can lead to burnout and regret. A planned exit allows you to transition smoothly and focus on your next chapter. Often time, the health condition or personal circumstance may handicap the owner from exiting their business.

Take Action Today: Your Business's Next Chapter Awaits

Understanding these paradoxes is the first step towards a successful and strategic exit. Don't let conflicting emotions or a lack of preparation prevent you from maximising the value of your life's work.

At Fey Day, we specialize in navigating these complexities. We help Singapore and Malaysia SME business owners:

Assess their readiness for sale.
Prepare their business for maximum buyer appeal.
Provide objective valuations.
Connect with qualified buyers.
Negotiate favourable terms.

Don't wait for the perfect moment – create it. If you are planning to sell your business in Singapore, contemplating your exit strategy, or simply want to understand your options, now is the time to act.