Understanding the process in advance will clarify your expectations… and protect your sanity.
Recently a restoration business owner called and asked, “What should I know before selling my business?” It’s a perfect question and should be asked by every owner nearing retirement.
The obvious answers include business value, deal structure, timing, best buyers, wealth preservation and more.
However, after 20+ years of ensuring successful retirements, key lessons have been learned. They extend well beyond the obvious.
Recognize the Emotions Behind Selling
When you’ve worked for 20 – 30 years building a business, let’s face it, it’s scary to think about doing anything else! Ownership has its privileges, financial and otherwise. Being the boss brings a gratification that may be difficult to give up- you are needed, people depend on you and your opinion is paramount. It’s troubling to some when realizing those privileges will not exist post sale.
Understand the Process of Selling
Transitioning your business is not a decision, it’s a process. In fact, a detailed process with your life’s work at stake. Many are scared by the term ‘exit planning’ because it sounds daunting. Believe me, it’s not. It’s simply assembling a few answers which allow you to make the best decisions.
Clarify Sales Price vs. Yield
I often hear something like this, “I have a restoration company doing $5.2M a year… what’s it worth?” I appreciate the question, but clarifying questions must include:
· Will it be an asset or stock sale?
· What’s included or not included?
· How is the balance sheet adjusted?
· What will you pay in taxes post sale?
Though sales price is important, yield is the critical figure.
Select an Advisor You Trust
An advisor will help educate, prepare, then navigate. An advisor should also ensure a Transition Team is in place, including the seller’s CPA, estate planner, wealth advisor and business attorney. Together the team focuses exclusively on your best sale and quality of retirement. Every advisor should be a highly experienced and trusted individual.
Pay Attention to the Details
Packaging and selling a business is a highly detailed process- valuations, assembling accurate and convincing marketing material, communicating with a multitude of buyers, defending the significant goodwill or blue-sky present, LOI’s, negotiations and due diligence.
You’ll rely heavily on an advisor for these details. Understanding the process in advance will clarify your expectations, as well as protect your sanity.
Buy a Good Pair of Running Shoes
Properly selling a business will take approx. 8 – 14 months. Once the decision is made to sell, your marathon begins. These months being the longest of your life. Why? Once the decision had been made, you’d like it sold by tomorrow… sooner if possible. A week will feel like a month, a month like a year. All too common.
The best advice- recognize and address your emotions, ask questions for an education, stay engaged in the business, and get yourself a good pair of running shoes for the journey ahead.
