Is This My Only Option to Sell?

Rock, I’ve been thinking about selling a modest flexo printing and die-cutting business that I started in the 1980s. I’m pretty sure I don’t want to stay with the new owner as an employee, salesperson, or consultant after I sell it. I considered selling to a direct competitor because he said no investor would buy a company like mine with an inexperienced team at the helm. I have to say I’m a bit annoyed by his comment, but if that’s true, I don’t want to burn any bridges. Before I go that route, I thought I would check with you.

Prospective buyers do tend to feather their nests, don’t they? Rivals may try to confuse and intimidate you in order to knock down the asking price and elbow other buyers out of the game.

For that reason, I always say: Consider the source of “facts” when buying and selling businesses in the graphic arts industry.

When you work with a professional advisor (like LaManna Consulting Group), you start with the facts, which means a baseline valuation. A valuation provides a snapshot of your business at a point in time based on recent and current data. We look at which factors are enhancing and detracting from your marketability. With all this data and more, we create your valuation.

Along with the valuation, we will discuss your exit goals and the picture you envision of life after the sale. We’ll talk about where you are on the spectrum of emotional preparation. Are you in the “still thinking about it” stage or in the “yes, let’s make it happen” mode?

Then we’ll research the categories of buyers who might be a good match for your desired exit.

As we work with you to create an ideal picture of your buyer, we want to be open to many possibilities. We don’t want to limit ourselves at the beginning of the process or get locked into self-limiting beliefs about your company. You describe your business as modest, yet you’ve run it for 40 years. You may think you’re too small, disorganized, or unprofitable to catch a buyer’s eye. We don’t want to walk into negotiations with that mindset holding us back.

Also, we don’t want to default to a buyer with a limited budget, a tight grasp on the checkbook, or no business incentive to pay a premium. You deserve better than that.

From our experience – and you probably know this – direct competitors usually want to buy a company to keep someone else from buying it who would become an even more serious threat. They want your customer lists, and they may try to sneak a peek before they extend an official offer to “see if they’re any good.” They don’t need your equipment or real estate, typically. They will pay whatever they think they can. You need professional representation to help you manage the boundaries and nuances of selling to someone you know. Your advisor has been through this many times and can help you manage the mind games. You never win in negotiations if you show your hand or lose your cool.

Sellers must understand the following:

Buyers and buying organizations have many criteria, and timing is often the most powerful. Our goal in helping sellers is for you to be the best choice when the buyer is ready. To reach that point, we must build on your strengths and make you supremely appealing to the market. When the time is right, and the buyer has a window to buy you – cash, people, backers, etc. – you want to be ready to act.

This is the strength of having an experienced advisory team. We understand the importance of the buyer’s timing and what they need to make everything a “go.”

Regarding your inexperienced team, your buyer may not care that your team needs work. They are gauging the potential of your business to grow and improve – and fleshing out your team is a way they can get instant equity. Also, they probably have leadership talent within their own organization or network.

Let’s get back to the other types of buyers who may be interested in your company, even with its weaknesses.

Private equity buyers: These organizations have experienced teams and executives ready to lead.

Individual investors: They have access to talent and know how to bring in a hired gun if necessary.

Strategic buyers: They have a track record of buying and managing companies like yours.

Financial buyers: They know what they are looking for, how to make things profitable, and how long it will take. Suppose they have to hire experienced managers. That goes into their calculations and is reflected in their offer.

Do you see how it is the BUYER’S due diligence to evaluate and position the potential of their business to grow and be successful once you are no longer in the picture? Once your salary, owner’s equity, and other costs are off the books, then the new owner may have a tidy profit. Don’t assume buyers want you hanging around!

Getting your company organized and led by a competent team will make you more marketable versus chaotic and ill-managed. That’s a fact.

That’s why, when you work with the LaManna Consulting Group, we will have a heart-to-heart discussion about why you have an inexperienced team at the helm.

There are many reasons we see inexperience in the ranks of graphic arts firms. Do any of these apply to your situation?

• High turnover
• Lack of trust
• Owner never takes time off
• Over-reliance on contractors and seasonal workers
• Attempt at cost savings by choosing or promoting managers who don’t have the proper background
• Lack of internal training or leadership programs
• Unwilling to give managers power because of fear they will surpass you

As we research your situation, we will do deep dive into why your competitor wants to acquire your business (what’s happening over there?) and whether they’re a suitable option. Our researchers usually uncover interesting things during this phase of our work.

If your competitor is a valid and qualified buyer, we will build a values-based user case to optimize your asking price based on the features and criteria the buyer cares about and is willing to pay for. This step is crucial in setting your asking price and anticipating the buyer’s counteroffer.

Buyers will try to intimidate you with supposed facts to drive down the asking price of your graphic arts business – get the facts first!

Remember, always consider the source of information.

Whether you stay on to work with the new owner after the sale is a factor for you to decide, but your competitor is aware this is an issue for you. Going forward, do not share any information with buyers that gives them a psychological advantage in negotiations.

If you decide to come on as a coaching client before the sale of your business, we will discuss your employment team in detail because they are a vital asset in the sale of your business.

• Do you have the right people in the correct job positions?
• Who else do you need to hire and train?
• Should you bring in a contract general manager whose presence and experience would put a buyer’s mind at ease?
• Will you consider a brief transition period where the new owner can learn about your business and get up to speed?
• Are you emotionally ready to hand over the reins?

Take a look at this special report we prepared for owners who are starting to explore their exit options: Acquisition Criteria for Printing Companies. Download it with our compliments, and then give me a call.