Are you ready for the coming tidal wave of retirements? Over a third of the companies in our industry will change hands in the next 10 years.
A few owners have already prepared, planning to sell to a family member or manager. They have a roadmap and are ready to deal with the next steps.
But the majority of owners have no plans; only thoughts, worries and misperceptions about the complexities of what’s ahead. Even for driven entrepreneurs, it’s hard to think of saying goodbye to a business that’s been built up over decades of dedication and hard work.
Yet employee, customer and other stakeholder futures hang in the balance.
The longer owners put off getting organized, the more likely it will cost them and their stakeholders dearly.
In the last several months, I’ve been hearing from distributors and contractors who want help with a business exit. Some call because they “want to sell while the economy is still strong.” Others call because they suddenly realize they’re ill-prepared to objectively market their companies.
If you’re thinking about your exit plan, here are some things to consider:
1. Prepare yourself. Letting go is really difficult. There’s often a sense of loss or apprehension. Selling a company is one of the biggest things an owner will face in a lifetime. Before embarking on a sale that could upset your organization, customers or family, ask yourself first, “Am I really committed to following through?” Then take some time to think about your exit priorities: your employees, your customers, your financial well-being and more.
2. Polish your company’s value. As you would prepare to sell a house by putting on a fresh coat of paint, making minor repairs and clearing out clutter, many businesses need a similar treatment. Prepare a marketing checklist, identifying actions needed to help your business look its best. Often these will be things that you’ve intended to do for years: updating your website to reflect your full menu of services; cleaning up customer lists; revising marketing collateral; etc. You also might need to sell off dead inventory, old equipment or even parts of the business that don’t fit.
3. Target. Like any marketing plan, you need to be laser-focused on the target customer. Profile the likely buyer, one who shares your core values, culture and business approach. Aim to find someone with the skills and mindset to run your business (and not run it into the ground). Most importantly, your target must have the financial capability to do the deal.
4. You’re not just selling financial statements. The strength of your management team, the rigor of your business processes, the efficiency of your operation and the sustainability of your customer list are all critical factors that make a big impact on the potential value of a business. Make sure you can market these with a concise and fact-based offering presentation.
5. Build a team. Avoid rationalizing that “you’re too busy running the business to think about how to sell it.” Assemble a team that can help you with the process. A great team will bring a reality check and help you with your tune-up plan. Good advice is not cheap, but compared to leaving 30 percent plus of the business value on the table, it’s a bargain. Plus, your advisors will help get the paperwork done during the cumbersome due diligence phase.
6. Timing is everything. A sale that gets you full value can take a year or two to prepare for. Get going now so you won’t leave your company’s future to chance. You want to be able to look back on the sale with satisfaction and no regrets.