A: When Great Numbers Align with Your Emotional Readiness.
Sometimes it can be hard to pinpoint when to sell your business. Burned-out business owners who feel emotionally ready let go sometimes discover they aren’t financially ready to meet the expectations of today’s sophisticated business buyers. But that isn’t always the case.
We recently worked with a client who told me he felt ready to sell his substrate distribution business. When we looked at where the company was financially, the results were off the chart! Opportunities to sell the business were likely to be lucrative for the owner.
This substrate distributor was among the two percent of business owners who truly are ready to sell their businesses. And he didn’t even realize it.
Why am I sharing this success story?
It illustrates an important point: If you are considering selling your business this year or in the next few years, begin preparing now. You could be sitting on a goldmine without realizing it.
How Carving a Niche Builds Success
When I first saw the numbers for the substrate distribution business, I wondered why this entrepreneur’s company was so successful. The key, it turned out, was that he carved a niche in the market unlike anyone else.
He had built his specialty substrates company over nearly 40 years. With so much experience in such a specialized area, he had gained the trust of the industry’s top players, including many of the printers and converters in the region.
How successful was he? Normally a distributor turns a five percent net profit. When we ran an independent valuation on his business, we found he was making a 15 to 20 percent net profit. Based on the NAICS/SIC code, that kind of bottom-line profit is exceptional.
In fact, he was so successful that it was difficult to even find a comparable to his business. It was a far better outcome than he, or I, could have possibly predicted.
The Pitfalls of Hesitation
The moral of the story is that if you are thinking about selling your business, don’t hesitate to begin the sales process. The right process will prepare you both financially and emotionally.
We recommend starting with an independent valuation. Yes, the prospect of an outsider appraising your business can be daunting. You don’t know what kind of numbers will turn up, and the last thing you want to hear is that your business isn’t as financially sound as you thought.
On the flip side, the news might be better than you guessed. When the substrate distributor’s numbers came through, he was as surprised as any of us. And, he was incredibly pleased when I started to align him with multiple qualified buyers whose business goals were synergistic with this own.
Yet even as great as their numbers may be, some owners aren’t emotionally ready to sell. Separating yourself from your business can be extremely difficult. Your business is your baby. It’s part of your identity. Then suddenly, it’s gone!
What would have happened if my distributor friend wasn’t emotionally ready to sell? Even with the fantastic valuation, he might have clung to his business. Then, who knows what could happen?
The fact is: Your golden opportunity to sell might fade away while you hesitate.
The stock market could plummet or a competitor could decrease the value of your company. You or your key employees could suffer serious health problems or unforeseeable events (such as the COVID-19 pandemic) could wreck the valuation of your company.
If selling has crossed your mind but you feel emotionally unsure, read the sage advice of Paul Cronin of the Platinum Years. He can help you create a plan so that when the right time to sell your business comes, you will be able to walk away.
Selling your business takes the right amount of financial and emotional preparation. If you’ve thought about selling, it’s never too soon to begin preparing. Who knows? If you have been running your business wisely, your company’s valuation might suggest that moment is now. Are you ready?
You may feel emotionally ready to sell your business, but are the numbers on your side? Call me and let’s talk. (561) 543-2323