- How do I know when it's time to consider selling or transitioning my or our company?
- How do I know if I'm personally ready to transition?
- Is passing the business down to the next generation a good idea?
- Should I increase the value of my company before selling?
- What are Buyers looking for in a business?
- How will I know if my company is really ready to sell?
- How can I sell for more?
- How much competition is there from other Sellers?
- How do I get my management team in place and ready?
- What will I do with myself after the transition?
I often write and speak to groups and individual Owners about selling their company for 300% more than they could currently.
At first there is a look of disbelief, quickly replaced by the question 'how'.
There are multiple reasons an Owner has stopped growing and or improving the value of their business.
(The same comfort level logic works for most anything. Your health, personal finances or relationships etc.)
The company is the size it is currently because the Owner can control all aspects of it. Generate enough sales. Wrap their arms around the operations. Be comfortable with the finance side. Continue to run the same sales and marketing efforts. Not have to replace anyone.
Basically they have reached a repeatable level of success. Essentially experiencing the same year over and over again.
But what if you want to have a different more successful year vs the previous one?
There are typically 3 key areas of your business that need to evolve, if you want to potentially transition a company for 300% more.
1. Open your arms wider. Think bigger, take on larger opportunities, give yourself permission to stretch. Don't be afraid to screw up. It will happen and you will overcome and succeed.
2. Owners often tell me they can't finance growth. There are many more resources for financial help than the bank. Once you find one or two that work for you, you're comfort level will rise and that project you didn't even try for in the past is now real and in your reach.
3. Finding good, qualified and reliable employees is difficult or impossible. First of all that's not true. You just need to find a great resource to help you. Once you do find the right assistance and make a successful hire, your luck begins to change.
The business runs better, new opportunities are identified and secured. You begin to attract the right staff and better customers. You have effectively removed some of the negative roadblocks and made room for more positive results. You've created a vacuum to be filled by success.
Now you have the bandwidth to try some of the ideas that have been on the backburner. Tap into and reveal hidden opportunities to increase sales or improve processes, make your company what it should be. Bigger, better, able to run on its own.
Get out of the way, focus on just what you love to do and work on the business not in it.
It's not going to happen overnight. You will require help. And yes it's worth it.
Ask yourself 'WHO' can I find to get the above tasks done, not how.
If you'd like to discuss the future success of your company let's meet for coffee or lunch. You can tell me about yourself and your business. I can fill you in a bit on who we are.
Alternatively please explore our website for more insights into this whole growing before transitioning thing. www.warrenbdc.com
The IBBA and M&A Source Market Pulse Survey Report for the fourth quarter of 2018 has a range of interesting insights. The survey’s purpose is to provide an “accurate understanding of market conditions for businesses being sold in Main Street (values $0-$2MM) and the Lower Middle Market (values $2MM-$50MM). This national survey was designed as a tool for business owners and their advisors and has the support of both the Pepperdine Private Capital Markets Projects and the Pepperdine Graziadio Business School.
One of the most striking facts to leap out of the report is the fact that a full one-third of advisors fully expect the strong market to end this year. Overall, advisors are not optimistic that the current climate will continue through 2020. In fact, advisors are encouraging sellers to consider placing their businesses on the market now, while the market is still strong. This is according to Craig Everett, PhD and Assistant Professor of Finance and Director of the Pepperdine Private Capital Markets Project.
One fact from the report that could be overlooked is that only a mere 8% of advisors expect the current climate to last for 48 months or more. Additionally, only 9% believe that the current climate will last between 24 to 48 months. Perhaps most striking of all is the fact that 60% of advisors feel that the current climate will end within the next two years.
Business owners who are considering selling should be advised that almost two-thirds of advisors now feel that there will be a significant shift in the next two years. Considering that it can take a year or more to sell a business, business owners would be wise to consider this important fact.
The report sites Neal Isaacs, Owner of VR Business Brokers of the Triangle who states, “Deals are taking longer in due diligence as buyers work hard to validate their investment and make sure that what they’re buying is worth the premium price today’s sellers are commanding.”
So, is now the time to sell? Many experts feel that it is possible to lose a sizable amount of value if one waits too long to sell. Even just a few months can make a huge difference in terms of perceived value and the ultimate sales price. Working with a professional is a key way to ensure that you are selling at the right time and secure the best possible price.
Copyright: Business Brokerage Press, Inc.
Excerpt from 'Moving Forward'
Over the last couple of years you've kicked some tires, read a few articles or books, spoke to a few friends and maybe some professionals with experience in selling businesses. Then you put it all on hold because selling your business was never a serious consideration. After all you were still young.
If you read the business press today, it is shocking the number of Boomer Aged Business Owners with no real plan to sell their business. In Canada it's estimated there are 550,000 Boomer Aged Business Owners.
1. Over 75% of you plan to sell within the next 10 years. That's a lot of competition.
2. Less than 10% of you have a team, formal exit or succession plan in place.
3. Over 82% expect the sale of your business to fund your retirement. That's a lot of pressure.
As I said earlier, over the years I've worked directly with hundreds of owners of small and medium-sized businesses, like yourself. And spoken with many more. It is disturbing to realize the number of entrepreneurs who don't have a real exit strategy in place. There is no thought out plan to sell or transition your business.
In addition there are a huge amount of business Owners willing to let your businesses go for well under what you could sell for. Mainly because you don't want to do the work to prepare the company for sale.
Or you've chosen to ride it out for a few more years, taking as much cash out of the business as you can and then plan to just close the doors with little or no thought for the negative impact on
employees, vendors and customers. Let's not forget our economy which is not even close to being ready to absorb the impact of hundreds of thousands of Owners shutting down over a concentrated period of time.
The other option being considered by Owners is to 'die with your boots on'. These are the Owners planning to work until you drop. A plan based on loving what you do, working is an economic necessity or you simply don't know what else to do with your time. Or whatever story you want to tell yourself.
In many cases, initially, you're taking business selling advice from your current lawyers and accountants. Which is great if the trusted advisers have experience buying and selling companies. Not so good if they don't.
You are letting your baby go for 2, 3 or 4 x EBITDA* based on a volume of sales well below what it could be. Increased sales, a reshuffling of people, improved marketing, better operations and financial controls could all help to increase EBITDA* and therefore garner a sale price 6+ X. Especially when your annual sales break the magic $10,000,000 level. You could sell for far more than you have ever imagined was possible. It just requires some preparation.
*Commonly abbreviated as EBITDA, an accounting measure to calculate a company's net Earnings, Before Interest expenses, Taxes, Depreciation and Amortization are subtracted. Used as a proxy for a company's current operating profitability.
You could wait a few years and receive much more for your business. Anything done to increase the value of the business will help to make the company more desirable to a Buyer and valuable to you the Owner.
For years you considered improvements to your marketing, operations, finance and sales departments. Thought about enhancing technology, or even replacing staff. But you never followed thru.
Every SMB I've ever visited always included the obligatory tour. The Owner inevitably introduced his staff as: This is Jeff our Marketing Manager but he's not really a marketing person more a sales guy. Meet Susie our Controller, but she's really only qualified as a bookkeeper. Jan who doesn't get along with anyone but I keep her anyway. And my children who couldn't get a job elsewhere so they work here, etc.
Always one step below what they should be. No not the whole staff or you wouldn't have a thriving business. Just a few key players who help to keep you back or cause some frustration. Well now you may want to reconsider. The new Owner will be assessing your people and your judgement in people. They will be spotted and quickly. It will be held against you.
There are good ideas not acted on because they were an unnecessary expense or it was so much work you just didn't bother.
If you have an established business, consider returning to why you got into the business in the first place. Get in touch with what you were passionate about and determine how to get back to doing the things that you can’t wait to do each day.
There is no shortage of experienced folks to perform the functions you are not comfortable with or even qualified to do. Stop doing the stuff you hate and spend more time working on the business not in the business.
Whether you want to accept it or not, change is coming. The average age of a seasoned business owner is 68. Of all established businesses in Canada and the United States, 65% are owned by these same seasoned owners. That means most founders of family businesses are facing the inevitable decisions they have put off for the last few years.
You can't wait it out or drive it away. Likely your kids will not be taking over. You may or may not require the funds from the sale of your business to finance your retirement today. But who knows what the future has in store for you.
As I've said many times to my readers and audiences, you need to start now, making the decisions necessary for a great transition. If you don't, it may be made for you. Health issues, yours or someone close to you, can pop up unexpectedly. The marketplace may dictate what happens to your business. Competition to sell may be greater than you anticipated. The appeal of or desire to purchase your company may be less than you thought.
And finally, statistically, selling successfully is not in your favour. Four out of five businesses that go to market DO NOT SELL. So it appears it may be time to take this whole transition thing seriously.
We didn't start out to become family therapists. It just happened. If you're the Owner of a family business perhaps you can relate to this week's message.
Working with family business owners is fun, challenging and very rewarding for us. Their business and personal lives are intertwined. More interesting is when you add in partners (and their families) who also own and run the company. Another layer of complication. Blood family or work family they typically interact very much the same. They are family and that means holidays and special occasions together, personal conversations and typically some fighting. Sometimes resolved and sometimes not.
If they are fortunate, respectful of each other and work hard at it the experience can be quite wonderful. If not it can get messy. As with any family dynamic everyone has their role and typically home actions are seldom different from work actions.
To keep the peace, you've learned to accept and deal with their peculiarities, their specific needs and the lack of change - no matter how hard you try to accommodate them. People don't change and hoping they will is a common theme in family businesses. Sometimes it only affects the family. Often the behaviour can reach into the success of the company and have a very real negative impact on non family/owner staff.
At some point you will determine that it's time to deal with the idea of transition. This is where we come in. If you think what I've written so far is even close to the truth wait until you start the transition process. The opportunity for challenges multiplies exponentially. Issues and ideas that have been tabled in the past, now need to be dealt with. Ambitions come out and the jockeying for position heightens.
Family therapy is only one part of the process, but it can be as key to your success as cash flow, sales & marketing, human resources and production. You will be riding two sides of the same sword, family and business.
You may think you have the family side handled until the serious conversation starts about the business. Who will run what, who gets what and about a thousand other things you never thought you would be dealing with. This is why we take on the role of a 'family therapist' as well as a Transition Advisor.
To address the many family and business issues that can come up, we make sure our Growth Strategists have family business experience to complement their business building background. In our process, both sides are covered and one without the other is not advised. Remember it's a 'family business'.
Business Owners need to ask themselves this one question. The answers will come to them lightning fast. What stupid things am I doing to screw up a potentially successful sale or transition of my business?
February 2, 2018
After speaking with several of my readers and clients about their holiday break, I learned that the common theme was using the time to think.
With a nod to Jeff Foxworthy the comic, here is my list.
If you're thinking about running out of time, you might be ready to start transitioning.
If you're thinking about who could carry on your legacy, you might be ready to start transitioning.
If you're thinking about staying or going, you might be ready to start transitioning.
If you're thinking about growing your business way bigger, you might be ready to start transitioning.
If you're thinking about what your life will be like after, you might be ready to start transitioning.
If you're thinking about spending more time with family, you might be ready to start transitioning.
If you're thinking about what's going to happen to your staff, vendors and customers, you might be ready to start transitioning.
If you're thinking about how much you don't know about transitioning, you might be ready to start transitioning.
If you're thinking about what a great ride it's been, you might be ready to start transitioning.
If you're thinking about not wanting to stop, you might be ready to start transitioning.
If you're thinking about how to download your decades of experience, expertise and contacts to a successor, you might be ready to start transitioning.
If you're thinking about not knowing where to start, you might be ready to call me. Eric 416-270-2466 or email email@example.com.
Not quite ready?
The world of selling a business is not black or white like some owners think. There are many shades of gray. You owe it to yourself and those close to you, to find out what your options are right now. Listen to my latest podcast now.
Download this free PDF copy of MOVING FORWARD. Please enjoy the benefits of 'Getting The Triple Effect'.
Cheers, Eric Gilboord
A great question and we get to answer it more often than we think. It's typically our choice and we live with the consequences. We also sometimes bring others into the result and are therefore responsible for the impact of the answer on their lives.
So regardless of whether you're making a poor choice in clothing and embarrassing your spouse or a business decision that affects the entire company you need to decide.
Would you rather be the one who says I wish I had or the one who says glad I did?
Take action now, Eric
If you want to 'Get The Triple Effect' - Sell your business for 3 times more and 3 times faster.
Purchase my book from Amazon.ca or Amazon.com
Ask yourself right now. Who would you rather be?
This is a great article on necessary steps to a great sale of your business. Basically you need to consider the sale of your business as the single most important client you will seek out and close.
Eric Gilboord, A2E
7 Essentials to Sell Your Company at a Premium
by Robert Sher as seen on Forbes.com
All too many mid-market CEOs sell their companies for far less than what they’d hoped for because they hadn’t prepared for the “exit day.” In my research and experience, I’ve found seven strategies to be essential for executives who some day want to cash in on all the hard work and risks they took.
Ever thought about what you would do when running the business day to day was no longer your responsibility?
To get your Sellability Score Report and find out what your company could be worth click here.
Forget about selling your business and focus on increasing the value. If you do it right, the buyers will come to you.
It's a crowded market and lots of business owners would like to sell. Some started early and many have waited too long. No one can predict how long it will take to sell your company. You can try selling it as is or increasing the value first. With more value you're in a much stronger position to attract buyers and negotiate a better deal.
Finding buyers for a business can be more time consuming and often more difficult than you might think. Much like selling a house or a car you can fix it up just before you sell or do it in advance and enjoy the benefits as you go.
You may have some nibbles but likely one real shot at selling the business. If you do it right that's all you need.
9 Tips for Selling Successfully and Exiting Well
1. Not sure what to do, don't have a qualified team or just too tired. Engage experts in Operations, Finance, Sales & Marketing, Human Resources and Legal. Make sure they understand what is needed to sell a business.
2. Stop working in the business and start working on the business. Pull away from the day to day responsibilities and spend quality time looking at the present and future of your industry and your business.
3. Get back in touch with why you loved building this company. Re-energize yourself and enjoy the selling journey. You won't feel as pressured and wind up taking the wrong deal.
4. Recognize the imperfections and do something about them. People, systems, finance etc. Often it is the unwillingness of the owner to make the tough decisions that will be their downfall. If it walks like a duck and talks like a duck it won't fix itself, or it would have already.
5. Get your sales and marketing updated and aligned. Make sure they're working in an integrated effort. Ideally this should happen before you start the selling process but good sales and marketing are always welcome.
6. It's not just about great sales numbers. Great operations and strong financial controls deliver profitability and desirability as well.
7. Add at least 4 years on to your exit strategy. Count on 1 year to do the deal and 3 more to ease your way out. The new owners will likely require your participation to provide experience, industry introductions, continuity with staff, vendors, and customers.
8. Not sure if you really want to sell? Run improvement efforts parallel to selling, as you don't know how long it will take and you just may change your mind.
9. Attend our next workshop. We'll discuss all of the above and more at our half day event on 'identifying weaknesses and increasing the value' of your company. The cost is $250 and includes a full report on what your company could be worth in it's current state or with improvements. This is a private by invitation only event for owners of established businesses with annual sales in excess of $2,000,000.
If any part of this post speaks to you or to someone you know please feel free to email my Assistant Cheryl firstname.lastname@example.org. Schedule a telephone call with me or we can talk in person over a cup of coffee and figure out your next move.
Sell Your Business On Your Terms
When it comes to selling your business you have 2 choices. Sell it as is or fix it up and put yourself in a much stronger position to negotiate a better deal. Remember it's not just about the money, often the terms on which you agree are equally as important.
Finding buyers for a business can be more time consuming and often more difficult than you think. Much like selling a house or a car you can fix it up just before you sell or do it in advance and enjoy the benefits for a while. You don't know how long it will take to sell. Count on selling being more difficult, more time consuming and more expensive.
Like many things in life it comes down to doing the work, identifying the weaknesses, making the changes and improving the value. Be careful, you might just improve your company to the point where it makes a better business decision to keep it.
5 Tips for Selling On Your Terms
Looking At Your Customers, Through An Angel Investors’ Eyes
by Eric Gilboord
Angel Investors often invest money and time. As a business owner you’re investing your time, resources and money in acquiring or keeping customers. The wrong customer can be costly and disruptive to your company. Your customer base is like an investors’ portfolio. Smart Angels review their investments to adjust for performance and economic changes. Wise business owners do the same with their customer base.
Typically 20% of the customers contribute 80% of your income. An experienced Angel may invest in 10 companies hoping to score a hit with one or two. It may be time to review your customer list and fire the bottom 10% as an investor might do while cutting their losing investments. Then focus your resources on finding better customers with larger opportunities. Or simply spend more time on some of the good customers you already have.
Finding good customers and keeping them is hard enough without spending a disproportionate amount of your time and resources on generating more new ones. Before you accept a new customer, consider using the indicators below to determine whether or not they are a good fit for your company. Various criteria may be utilized. Here are 7 to get you started.
7 Things to Consider About Current or New Customers
I just went through this process and the clarity it delivers is well worth the effort. The questions can also apply equally well to a potential buyer of or investor in your business. A2E
From Seth Godin
Four questions worth answering.
Start with this before you spend time on tactics, technology or scalability.
If you would like some assistance in answering these questions click here.
Here are 2 of the most popular emails I sent out this year:
30 Things to STOP Doing to Yourself
30 Things to START Doing for Yourself
Over the past year I have spoken in great depth with dozens of business owners. There is a growing fear and frustration with not being able to achieve what they know is possible. The clock is ticking and they recognize change is required. Unless you change what you are doing to or for yourself the results will never improve.
If you want to SELL your business there will be change and we can help.
If you want to BUY a business there will be change and we can help.
When it comes to change You Are Not Alone
Eric Gilboord 416-270-2466
Successful business owners prepare their Sales & Marketing programs for the Fall, starting right now. You can do it on your own or with some guidance.
I have an outline template to help you with the preparation of your own Sales & Marketing plan. My gift to you, no strings, just click here and start planning.
This is the same working document we use at Warren BDC as a base to prepare detailed custom plans for our clients and to implement actions from.
Good luck, and it's ok to call if you have a question or 2.
Cheers, Eric A2E
PS: Need a gift for your SMB Customers, Dealers, Vendors, VARs or Franchisees.
10 Reasons to give away copies of my business growth tips book.
From last week:
8 Rules For Successfully Hiring Marketing Suppliers
11 Marketing Tips For Reviving Your Business
11 Tips For Continued Marketing Success
11 Ways To Get Your Marketing Started
This article is from my friend John Warrillow author of BUILT TO SELL one of the Inc. 2010 best books for business owners.
How do you imagine life after selling your business? Are you travelling? Europe maybe? Patagonia, or somewhere nice and warm?
If you’re like most of the business owners I know, you imagine selling your business, having a going-away party, and riding off into the sunset.
Increasingly, it’s not working out that way.
In a shaky economy, with banks shy to lend, the proportion of cash that business owners get when they sell is sinking with the proportion of the sale price put “at risk” in some sort of “earn-out” or “vendor take back” loan is going up.
Recently, I hosted a workshop in Toronto and invited an M&A professional who spoke about the typical deals she is doing these days. She shared the story of one buyer who is acquiring marketing services businesses for as much as ten times earnings before tax. The fine print? They only pay three times earnings upfront and leave the possibility of the other seven in a five-year earn-out.