Not Ready To Sell Your Business?
We get it…you have no intention of selling your business. As former business owners ourselves, we understand you likely have other plans:
- You plan to work for many years yet
- You want to transition the business to your kids
- You have employees who could buy it
- You might hire a president and then have him buy it
Someday though, you will be ready to sell. You may just become tired of the daily grind. Or you may find that your industry is shrinking. You may outgrow your business…or perhaps it will outgrow you. Or you may simply get “the call,” that once in a lifetime offer that is simply too good to refuse.
The bottom line is that when you are ready to sell, your business must be ready to sell. So to prepare for that day you decide it is time to sell, Decision Associates Mergers & Acquisitions offers our top 10 tips:
- The buyer who contacts you is seldom the highest paying buyer. Unfortunately, the highest paying buyer may not know you are for sale. To reach the highest paying buyer, we research those for whom the acquisition would be a strategic fit. The difference in selling price can 20 percent or more.
- The best buyers have a strategic purpose for wanting your company, i.e., 1 + 1 = 3 is not their goal, 1 + 1 = 5 is their goal.
- A buyer does not want you to know how they plan to leverage your company. But with careful listening and further research, we can determine that purpose. If you understand a buyer’s strategic purpose, you can negotiate to get paid for it.
- Sixty percent of sellers were not intending to sell until they got “the call” they could not refuse. It happens far more often than you think.
- Buyers focus on EBITDA so you need to generate EBITDA that is at the high end of your industry. That noted, buyers are always interested in business elements beyond EBITDA. They will add or subtract to their offer for each of these elements. To get a multiple that is above the norm, you have to know what matters and invest in these.
- A good transaction attorney will do a great job of negotiating with the buyer who contacted you. But it is not their expertise to find a better buyer. Finding a better buyer is what Decision Associates Mergers & Acquisitions does best.
- Decision Associates Mergers & Acquisitions has sold numerous privately held companies to Fortune 500 and international companies. Surprised? Our processes are key to making these sales happen.
- Forty percent of owners who approach us do not have their company in shape to sell. When this happens, we advise you wait and work on increasing the value. In turn, we assess the business and recommend a short list of improvements to increase the selling price substantially.
- Companies with revenue below $3,000,000 are difficult to sell for a good price. The profitability is too low for a buyer to support debt payments and leverage growth. To sell, you will need a plan to increase size and profitability.
10. Selling to a private equity firm seldom has a happy outcome. We have been there. It is not pretty.
Run Your Business For The Day You Sell It
Whoever buys your business – whether it be children, employees, a competitor or a strategic buyer – will need it to be “ready to buy.” From strong earnings and consistent capital investments to good markets and customer diversity to a strong management team and a predictable future. Without these elements, it is a poor investment and may not even be bankable.
And this is where we can help.
As partners in Decision Associates Mergers & Acquisitions, BJ Lechner and I have been selling businesses since 2008.
- All of our clients have been privately owned companies with revenue between $5,000,000 and $50,000,000.
- Our processes yield transactions that sell at prices well above industry standard multiples.
- No company we have sold has been moved or closed. In fact, all have grown and expanded and the employees still have jobs. Often, new buildings have been built and new products or services added.
We are extremely proud of our record. Accomplishing these outcomes requires careful analysis and research to find a buyer that needs this business, in this location to achieve their goals.
If you are like most of the owners we help, you will be concerned about more than price when you are ready to sell. You will want the business to stay local, you will want your employees to have jobs, you will want your community to thrive because of your business. As one client once said to us, “I don’t want to run into a laid off employee in the local grocery store. I cared about my employees when I owned the company and I still care about them now.”
Don Moore, Executive Consultant/Partner, Decision Associates Mergers and Acquisitions