I had finally decided. After close to a decade of growing and running my business, I was ready to say goodbye and move on to the next chapter of my life. My partner and I agreed. We both had taken this business as far as we could together and were ready to hand it off to someone else that would be more passionate about it so that we could pursue other things that we wanted for ourselves. But how does one sell a business? So many questions came to mind.
I began researching and looking for others that could help me. In the end, I reached out to my accountant and found a business consultant who specialized in preparing businesses like mine for sale. I leaned on them to guide me through the process. And wow! What a process! It is amazing how much I learned about running a successful business through the process of leaving it. But one lesson I learned the hard way really stands out to me – the importance of timing.
In reading that last statement, you might think by timing that I mean, “timing the market.” And you would be mistaken. There is a belief that you should time the sale of your business with when it would get the most return based on market performance. In truth, there is a lot that must align to make this happen. I have yet to meet a professional in this space – be they accountants, brokers, financial planners, wealth advisors, consultants, or others that have agreed with this sentiment. All have recommended against trying to time the market.
Instead, the timing I am referring to is both timing of your energy and company performance. Let me explain.
I was very emotionally invested in my company. It was a “baby” to me of sorts. I was attached to the people within that company and I cared for them and their well-being deeply. I was attached to my identity as an entrepreneur. I also had it in my head that I had not yet reached the level of success in some ways that I wanted to with that business. I had grown the business and grown myself as a leader. I had even built some level of “independence from the owner” – arguably the most important driver of transferable value. But I had not managed my stress well. I did not have a good work-life balance and wasn’t exercising the best boundaries with work and home. I was heading towards burnout and did not have as much energy as I once had for the business. I had lost my passion. I waited until I was absolutely ready to leave the company. I waited until I really did not have much energy left to give it to decide it was time to move on.
Waiting too long to start the process was my mistake and it cost me in two ways. It caused me to leave some money on the table because if I had shifted to focusing on building value earlier in the process, I could have demanded a higher multiple. In addition, selling my business was very fatiguing. I was pregnant in the final stretch of the sale process and was physically and mentally exhausted. It was a level of stress that was unnecessary.
Preparing your company for your eventual exit really translates to building value – transferable value specifically. Building transferable value is the best way to prepare for a transition, and it is also a good business strategy. Starting early and keeping your mind on the value of your business as you grow sets you up to be ready should opportunities or challenges come your way (e.g., acquiring, being acquired, navigating a business crisis, etc.). You will be growing your business in a way that fosters high performance and sets you up to demand the highest multiple should you sell.
Secondly, taking your business across the finish line of a sale takes time and energy and requires you to both keep one eye on the transaction and the other on your business. Navigating due diligence is time-consuming and requires a lot of attention. Simultaneously, you do not want your business performance to slip during the sales process. That business needs to look as bright and shiny as possible!
What is my recommendation to you?
Start early in focusing on driving value. Leave your business while it is performing well and you have the energy to carry your company across the finish line. Recognize that you always should be focused on building value. Also recognize that it is not about if you will leave your business, but when. My colleague and friend, Bob Weinhold heads up our Family Business Advisory services and has helped countless family businesses navigate business transitions. He sums it up beautifully – “build your business like you are going to leave it and build your business like you are going to sell it.”
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