I Wasn't Ready to Sell My Business
Like many entrepreneurs, I stepped into business ownership without much thought as to when my role in that company would come to a close.
But at fifteen years of ownership, we were approached by one of the large competitors in our market with interest in our company. The knee-jerk reaction was, “no.” Sell my business? No way! I loved what I was doing, and had plenty of years in the gas tank. I had envisioned working for at least five more years and to continue providing opportunities for our employees. But something made me pause.
Only three years earlier we were struggling as owners, after putting a dozen years into the business. Our revenue had fluctuated in a narrow range for several years. We were tired. We were faced with the next several years being a repeat of the last one. To be clear, the business was profitable and it was providing a good living, but the decision became clear after finishing another year: we had to make some drastic changes. So, for those following three years, that’s just what we did. The change was bumpy, but the motivation of not having another typical year was fuel for us to keep going forward with outlook of potentials that the change could bring. We gained insight from The Stages of Growth material. Some of the key insights we needed to become unstuck were pulled from this program. We eventually got our business back on an aggressive growth track. Our organization became a high-energy, highly-functioning, focused company that was hitting on all cylinders. It was exhilarating!
The situation had radically changed by the time I received the call from the competitor. We had tripled our team and revenue, and improved our margins 10 percentage points. Our systems and processes were scalable and well-defined. We felt like we were finally the “small giant” in our industry, having won independent surveys across the country as being the best in our industry.
So, there we were on the other side of that call wondering, “do we sell?” And echoing, “we aren’t ready.”
We are now a couple years removed from that call. And yes, we did sell our business. The buyers approached us because of a strategic fit. Even though the timing was not perfect, the buyers were as a good of fit as could be.
Reflecting on those events, there were three things that helped us build value into our business that would have lasted regardless of if we did decide to sell or not:
Build it to sell, even if you don’t.
I learned from “Built To Sell” that we needed to be creating a company that had transferable value. Even if we had not sold, the process of making the company ready to be sold also made it more enjoyable to manage.
Sell on the upswing.
As we pondered the offer on the table, we considered just holding out several more years until we had really got it to the place we felt we could. We realize now that the high multiple we negotiated was, in large part, due to the growth we had achieved in the past few years. The upward trajectory made the company’s future very compelling at that point. Selling at a plateau would have meant getting less for the business.
Know your number and stick to it.
“Built To Sell” also emphasized knowing your number, the figure at which you would not regret selling your business. We had already decided on the figure we wanted, and were fortunate to sell for well over that amount.
My partner and I were not ready to sell our business. You likely won’t be either when someone comes knocking. The question shouldn’t be if you are ready or not, but if your business is. The truth is that if your business isn’t built to sell, it may not be built to last either.
Find out how The Capitalist Alliance can help you stage your business so that your business is ready for sale.
Read more entries like this one in the new e-book, Moments From the Journey: Diary of a Business Owner