Is it Time to Sell Your Business?

Have you been entertaining thoughts of selling your business? Many business owners keep that thought in the back of their head. But if you don’t need the money, why should you sell?

Possible reasons include that you’ve gotten a good offer, you’re ready to retire, you are tired of the risk or you feel it’s time for a change. Or, if you have a family business, there may not be a family member interested in taking over. Whatever the reason you have to explore the option of selling, you’ll want to enlist the right team to value your company correctly and help you make the right decision to get the best price.

Maybe the concept to start your business was entirely your own. But you didn’t build a successful business by yourself — you had a team that most likely included lawyers, CPAs, investors, salespeople and your employees. When it’s time to sell, don’t try to do it alone. It’s time to build another team — one that will ensure you get the outcome you desire.

You would definitely want to include your lawyer, accountant, and an expert on the tax ramifications of the sale. Also consider adding a business consultant, even if you’ve never used one before.

Acquisitions is one of our areas of expertise at GlassRatner. We guide our clients through a process that begins with valuing the company, preparing and presenting the company to the marketplace, weighing offers from potential purchasers while balancing the objectives of stakeholders, and closing with the best possible purchase for that client.

We also work with distressed companies that may have filed or need to file for bankruptcy and need a quick sale.

Whatever your reason for selling, make sure to build the right team for the best possible outcome. It took a team to get where you are, and it will take another one to create a lucrative exit.

For more information on selling a business, please see “5 Mistakes to Avoid When Selling a Business.”

Tips on Handling That Unsolicited Offer

No doubt it’s flattering. You’ve worked hard building or running a business and now someone has expressed interest in buying it. You hadn’t considered selling but maybe now is a good time. But be careful how you respond. It’s easy to get caught up in the excitement and make costly mistakes. Here are a few tips on handling that unsolicited offer.

• Be careful about sharing information

If the potential buyer is really serious about buying your business, he won’t mind signing a non-disclosure agreement. Even then, be selective on any financial information you share. Your current financial statements were most likely prepared with the goal of minimizing the company’s tax liability and not to showcase its profitability. Make sure your financial statements are prepared to show maximum profitability.

You may also wish to hire an independent auditor with experience in your industry. Buyers may request independently audited records for the past two or three years.

• Hire a team to value and negotiate any potential sale

If you become serious about contemplating a sale, hire the best team you can to guide you through the process. In addition to any regular advisors you may have, you may also need a business broker, a financial planner, a lawyer, a financial advisor and an accountant.

Before you enter into any type of negotiations, you need to get an accurate, up-to-date valuation of your business. Selling a business may be the biggest financial transaction of your life. Don’t try to handle it on your own.

• Don’t be swayed by flattery

It’s intoxicating for someone to admire what you have created or have been running. Just beware of someone who heaps on too much praise — don’t be blinded by it and let your guard down, which may cause you to share too much information or value your company too low. As Adlai Stevenson said, “Flattery is all right if you don’t inhale.”

• Think about the potential future of your business

Dana Levy sold the email newsletter Daily Candy to Comcast for a reported $125 million, right before the market crashed. When ad sales didn’t materialize, Comcast began trying other avenues to raise revenue, changing her one-a-day email business model. In 2011 Comcast acquired a majority stake in NBCUniversal and shut down Daily Candy in March 2014. She and her employees immediately tried to buy it back but Comcast wasn’t interested.

“What they didn’t try was maintaining the brand integrity,” Dana said in a video interview on “What Comcast acquired wasn’t necessarily a list. It was a brand, a brand that was adored.”

How would you feel if the acquiring entity of your business is unable or unwilling to continue your business as you envisioned it?

• Ask yourself, do you really want to sell?

It’s nice to have a potential buyer and maybe it is a good time for you to get out of the business and try something new. But this is a question only you can answer for yourself. Do you still enjoy and feel passionate about your company? Do you wish to stick around for a while and be instrumental in its future success?

Selling a business is in all respects, a big deal. Be sure to give it the consideration it, and you, deserve.

The First Step in Developing an Exit Strategy

If you are a small business owner, do you have a plan on how you are going to leave your company? If you don’t, you are in the majority.

A recent study conducted by Securian Financial Group of 500 small business owners found that more than sixty percent of them have no plans to leave their companies and are not working on any type of exit strategy.

“One third of the business owners we talked to plan to leave their businesses in the next five years and 60 percent plan to exit in 10 years, but many of them have no exit plans in place,” said Andrew O’Brien, director, Client Solutions, Securian Financial Group. “With no exit plan, the small business owner not only risks the future of the firm but also its ability to generate income for the founder.”

In my work as a turnaround authority, I’ve seen way too many examples of unplanned exits from companies. Owners and CEOs have abruptly left due to scandal, suicide or medical situations. Sometimes they succumb to the stress and take an extended leave, or unexpectedly exit a company far earlier than they or anyone else anticipated.

These situations never go well. If you want your business to thrive in the future, long after you have left, you need a plan for your exit strategy. Even if you plan to work until your last breath, you still need an exit strategy.

Entrepreneurs are often too busy with just the day-to-day running of the company to look five and ten years down the road. And developing an exit strategy does take time. That gets me to the first step in developing your strategy.

You need to determine when you want to exit. That determines how you need to start planning. For example, if you know you would like to sell your business in five years, you would most likely have plenty of time to plan and implement strategies to make your company attractive to a potential buyer. But if you delay that planning, even just six months, then you only have 90 percent of that time remaining. The longer you wait, the fewer options are available to you.

Taking a long-term approach allows you the time to consider all the options available to you. Do you want to sell the company outright? Would you rather liquidate everything?

Other options could include going public or grooming a family member to take over running the company. You may want to consider merging with another company or make your business attractive to another for acquisition.

If you give yourself time to plan you also have time to hire the right advisors — financial planners, lawyers and consultants such as me who can direct you in selecting the best option for you and your future.

Giving yourself time to plan your exit strategy can help ensure the financial health of your company in the future.

You don’t want to find yourself in five years ready to move on to another challenge but not in a position to leave because you didn’t plan ahead. Thinking of the future is one of the most critical jobs of a business owner.

As an illustration I’ll close with one of my favorite quotes from Warren Buffett: “Someone is sitting in the shade today because someone planted a tree a long time ago.”

5 Mistakes to Avoid When Selling a Business

Most likely the biggest financial transaction you’ll ever be involved with, selling a business the right way is crucial to your future financial health and the continuation of a business that you’d like to see succeed.

Selling your business is literally, a Big Deal. Here are some mistakes to avoid when selling yours.

1. Identifying the best buyer early and negotiating only with that entity

Wow, that was easy. You’ve already found a buyer and now you just need to negotiate on price. You’ve told all the other potential buyers the business is sold. So many things can happen to derail a deal — problems with financing, inability to come to terms on the value of your company, negotiations that lead nowhere. Sometimes the buyer changes his mind and walks away from the deal.

photoA friend of mine has a big rock in his office with block letters on it that read, “Nothing is set in stone.”  Remember that when negotiating the sale of your business and keep your options open when identifying and negotiating with buyers.

2. Considering only the dollar amount when looking at offers

If this is a business you started, or a family business you took over, chances are you care a lot about its ability to thrive. And its reputation. As Warren Buffet said, “It takes 20 years to build a reputation and only five minutes to ruin it. If you think about that, you will do things differently.”

If you care about continuing the reputation you’ve built up for your company, take a deep dive into the culture and reputation of the companies looking to buy yours.

3. Handling the sale yourself

The saying goes that a man who is his own lawyer has a fool for a client. I would venture to say the same thing about someone trying to sell his business on his own. You need to hire business professionals, which may include tax lawyers, business advisors and a business broker. Some people try to save money, figuring they can handle the whole thing on their own. Respect your business and your time enough to hire someone to get the best possible deal for you.

4. Setting a price based on what you think your company is worth

Although you should be aware of a general market value of your business, to get its true worth you need to go through a thorough valuation process. Hey, maybe you’ll be pleasantly surprised and find out it’s worth more than you thought.

5. Not seeing your business realistically

In a recent Dove ad, women described themselves to a forensic artist who then produced sketches from their description. The resulting sketches bore little resemblance to what the women really looked like, and were actually much less attractive. (The video has been watched 55 million times on YouTube!)

Yes, that’s on a different topic about women and their self-images. But it’s a good illustration that we don’t always see ourselves realistically. And we don’t always see our businesses for what they are either.  Dealing with daily crises and all the things that go wrong, we may sometimes overlook all the positive aspects of our business. Or on the opposite spectrum, we may be in denial about the underlying problems that will affect its value.

Jim Collins, author of “Good to Great” said, “The challenge is not just to build a company that can endure; but to build one that is worthy of enduring.”

Make sure your business endures long after you’ve moved on.