Some lessons are best learned by repetition: doing it over and over and learning from our own mistakes. For other lessons, that approach is impractical, either because it’s either prohibitively expensive to use the trial-and-error method or because it’s an event that happens (except in rare instances) only once. Selling one’s business falls into both of those categories.
Your business represents a considerable investment of your time, your hard work and your capital, and the vast majority of business owners only get the opportunity to sell a business they own only once. Because of this, it becomes important to get the advice and council of someone who has done it before, and try to learn from their mistakes and successes. As for myself, I happen to be one of the small percentage of business owners who have sold a business more than once; three times, actually… with a fourth sale slated for next year.
If I could offer one bit of advice to a business owner thinking about selling, it is this: The clearer you can be about your goals for the next chapter in your life, the easier it will be to come up with a plan to meet those goals. You started your company with goals; the next chapter in your life deserves the same consideration. Are you planning to start another company, give back to the community through public service or simply enjoy retirement? Each of these options (as well as hundreds more) are possible, but may require different plans of action to achieve.
For me, the next step after identifying my goals was running the numbers: estimating how much money was needed to accomplish each of the possible options I was considering. I reached out to some of my fellow entrepreneurs for ideas and I talked to bankers and financial planners as well. If I retired, I how large did my nest egg need to be? If I bought another company, how large should that organization be and how much money would be needed? If I started another company from scratch, how much of an initial 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 50 people (though at times, that number seemed closer to 500). And I discovered three things about my own situation:
- I was bored with my current business
- I had to grow my current business further to enhance value, and thus gain more money.
- My retirement was underfunded, so my first priority after selling my current business had to be increasing that amount.
After setting aside enough money for retirement from the business sale, if I had enough money to start another business, that is what I wanted to do.
With goals established, I began working on a plan to accomplish them. I came up with a plan to expand my existing company by 100% over the next four years with the end goal to sell out in year 5. I am now in year 5, and all signs indicate that year 6 will be the exit opportunity. In positioning the current business for sale, I implemented something that I learned from my experience of selling the previous businesses: I structured my team’s employment contracts so they will benefit from either a PE firm acquiring the company or a strategic buyer in our industry buying us out.
You built your business through careful planning and preparation 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 achieve those goals.
I’d love to hear about your experiences on the subject or current challenges you face.