Is Selling Your Business Now Right for You

The thought of selling your life’s work stirs all the emotions; from anxiety, fear, apprehension to excitement. Running out of time, leaving money on the table, the future of your employees and dozens of thoughts run through your head at all hours. Deciding whether to sell your business is far more than dollars and cents – your personal and emotional goals, your financial future, and preserving your legacy all run the race within your mind. The one undeniable fact is you will exit your business one way or another; shouldn’t it be on your terms? Whether your time to exit is now or you’re exploring the idea, we want to provide education and motivation for you to walk through a more informed, confident decision.

As you consider your situation, there’s no OSFA or OSFM and no two businesses are alike. Everyone has their own story, their own goals, their own opportunities and their own challenges. As an entrepreneur, you saw an unfulfilled opportunity to create a solution, and the serendipity has provided for you and your family in many ways. Stepping into a similar mindset of ‘what’s next?’, the decision you will make is to answer the question of ‘why sell’ and ‘why sell now, or later’. Avoiding the inverse of having that decision made for you. While we don’t know what your why is, we can help you uncover insights having been in your shoes, provide clarity and help you evaluate where you are today and where you want to go. Another result is for you to take away key influencers providing alignment to your unique situation. In addition to answering ‘why’ is to consider when the best time to sell your life’s work will be.

“Many people take no care of their money till they come nearly to the end of it, and others do just the same with their time.” – Goethe

Timing can make or break the success of your business sale. Some owners choose to sell now to lock in a guaranteed outcome, avoiding potential downturns or market volatility, while others consider personal or professional milestones – hitting financial targets, minimizing potential risks, personal situations going on, emotional factors. The one constant in making this decision is you’re in control throughout a process of how prepared you are and want to be. After all, it’s your business and your decision. There will be telling signs along the way as each day passes.

Know Your Signs

• Your business has reached a peak in performance or profitability
• You’re unsure if you have enough left in the tank to make one more lap
• You’re feeling burned out or indifferent to push further
• You have tread left on your cleats but no one to hand over the reins
• Your health is beginning to let you know it may be time
• You’ve received an unsolicited perhaps compelling offer from a potential buyer
• Market conditions are favorable with demand for businesses like yours
• You are your business and no one can do it like you
• Your business is in a dip that can be improved with time and effort
• You’re emotionally attached to the business and unsure about stepping away.
• The current valuation doesn’t meet your future financial needs

Considerations

One of my favorite movies of the 90’s was the Hunt for Red October based on the Tom Clancy novel. Early in the movie when Jack Ryan was aboard CVN-65 USS Enterprise, the captain asked Jack, “What’s his plan? Russians don’t take a dump without a plan Jack.” At JSP, we encourage all potential clients to begin to formulate a plan years before you exit so an exit is not thrust upon you. Having multiple conversations with people you respect, gaining insights from finance, wealth management, legal and transaction professionals. Begin developing a framework of your own expectations of how your case can evolve when the time comes. There’re dozens of considerations on your plate and we would advise you to zoom in while you zoom out.

• How much money do I need to live with minimal change to post-sale lifestyle?
• How much tax will I have to pay and how do I mitigate the exposure?
• How much time will the process take to sell my business?
• What is the all-in cost from deal team members involved in selling the business?
• Should I rollover some of my equity for a second bite of the apple?

We’ve seen entrepreneurs begin with great intentions and great answers to many of their questions. Yet, the one fear above all others is how they will face the answer of time. Time to give it one last shot, “…because I need the money to retire…”, or “…my legacy is more important that any dollar amount…”. Time, for a variety of reasons, because you’ve sacrificed and devoted years and decades to an all-consuming business.

“Time is more valuable than money. You can get more money, but you cannot get more time.” – Jim Rohn

When seeking the answer to, “Is my business worth selling?” you must first understand its actual value. To understand what the actual value is for your life’s work, you must understand that it’s only worth what a potential buyer will pay for it. You will struggle with the realistic answers to both questions! One ego will overestimate its worth and another will underestimate the amount of work to accomplish it. You’re keenly aware top-line revenue growth and increasing profitability cures all as buyers are drawn to both. Strong financial performance signals stability and growth potential where they can build on what’s been created.

Certainly, understanding market and industry trends, economic conditions, government regulations, environmental concerns, technical debt, recurring revenue, predictability, scalability, brand reputation, owner dependence, financial systems and process disciplines all influence and impact what your business is worth.

Is it Now, Later or Never?

After four decades of engagements, the number of names and faces constantly changes, the one constant in EVERY potential business case is this:  There will be a gap between what you want to sell for and what your business is currently worth. We tell every potential client from day one: We will always tell you the truth regardless of circumstance and our #1 job is to get you the highest price for your life’s work. What we want from you in return is to decide one of these three:

-it’s worth exploring ways to increase the value before putting my business on the market.
-let’s sell it now
-I can’t sell it right now

Selling your business isn’t the end of the journey. In many situations, it’s likely your single greatest asset. Yes, it’s a big decision; yes, you must do it correctly, and yes, the right approach will provide great wealth for you and your family and set you up for future generations. Is selling your business right for you? The answer lies in understanding your goals, your business’ value, and your readiness for what comes next. Here’s three books we recommend you read and study to gain more insight into what you will undertake.

The Exit Strategy Playbook, Adam Coffey

Exit Mindset, Rem Oculee

The Art of the Exit, Jacob Orosz