Some lessons are best learned by repetition: doing it over and over and learning from our own mistakes. Selling one’s business is usually not repetitive, but this story is about an owner selling three times.
If I could offer one bit of advice to an owner thinking about selling: The clearer you are about the next chapter in your life, the easier it will be to plan those goals. You started your company with goals; the next chapter in your life deserves the same consideration. Are you planning to buy or start another company, give back to the community through public service or simply enjoy retirement? Each of these options require different plans of action to achieve.
The first step is to run the numbers: formulating an estimate of how much money is needed to accomplish each of the possible options. I reached out to my fellow entrepreneurs for ideas, talked to bankers and my financial planner. If I retired, how large did my nest egg need to be? If I bought another company, how large should that company be and how much money would be needed? If I started another company from scratch, how much investment would be required and how long would it take to build a sustainable business?
Over the course of six months I consulted with around 20 people and I discovered three things about my situation:
- I was bored with my current business.
- I had to grow my current business further to enhance value, and thus invest more money.
- My retirement was underfunded, so after selling my current business, much of the proceeds had to go to the retirement account.
My plan was to set aside enough money for retirement from the business sale and start another business in another industry. I came up with a plan to expand my existing company by 100% over four years with the end goal to sell out. I sold to our largest customer after three years and banked 50% of my money into retirement.
I soon started the new business and sold it to a PE firm after four years. Then I acquired a company which I currently plan to sell in 7-8 years. At this company, I implemented new processes that I learned from selling the previous businesses: I structured my team’s employment contracts so they will benefit from either a PE firm or a strategic buyer in our industry buying us out. I found from previous sales that having a great team tied into the company increased its sale value.
You built your business through careful planning and years of hard work. Having a clear vision of where you want to go and what you want to do next will make it easier to decide what to do now.
If this process sounds very complex, don’t put it off. Just call us and we can help you define your needs. Many of us have sold businesses and we get you started at no cost.
