Every business will reach the point when it’s time to sell. The sale may be to another family member, to employees, or to a party outside the company. As the business owner, the decision will be one of the biggest of your career, so make sure it’s not a quick decision. You need time to prepare your company and yourself if you’re going to get the best price.
I sold my company in 2017 after 35 years of hard work, long hours and many ups and downs. Over the years, I watched my father in his business. In 2004, at the age of 75, he was tired and ready to sell. But he had no exit strategy. He didn’t ask for help in selling. He simply put the word out in his industry that the company was for sale. Unfortunately, word of mouth was not enough. No buyer came forward and he ended up selling the assets below market value to a smaller local company. Looking back, he regretted waiting so long to sell and not preparing for the sale in advance. I learned from his regret.
What do you know about selling a business?
I first thought about selling my business in 2008. The economy was in turmoil and so was my company. We weren’t profitable and I was tired. I knew nothing about selling a business, so I attended a free one day “Grow and Exit” conference in Toronto, hosted by Generational Equity, a merger and acquisition (M&A) advisory firm with years of experience selling businesses across North America.¹ During the conference, I gained a beginner’s knowledge on business valuation and what the M&A sales process looks like, but I still had a lot to learn.
At the end of the conference, I met with one of the advisors to ask about selling my business. He asked, “Doris, is your company profitable?” When I replied ‘no,’ he told me (politely) that my business wasn’t ready to sell. “Go back to work and make it profitable,” he said. So, that’s what I did. TIP! The best time to sell your business is when it’s doing well.
Selling takes planning
After the conference, my initial priority was creating a detailed business plan. I asked key members of the team to help with the main components — a financial review, a marketing plan and a SWOT Analysis (Strengths, Weaknesses, Opportunities & Threats). We focused on reducing expenses and increasing sales. We identified areas for improvement. We noted places where efficiencies could be implemented in our day-to-day operations. We examined the top 20% of our expenses (as these expenses would be responsible for 80% of our costs) to find ways to reduce costs. We also hired a marketing specialist to develop a marketing plan to gain new customers in new sales regions.
Our financial review uncovered something crucially important — our profit margins were too low! We immediately made price corrections on key items. Not one customer complained when we increased our prices because our competition was still priced higher. We implemented some changes immediately. Others happened over the following year. But within three years we had turned the company around. We were profitable!
Running my company took a great deal of time and energy and I still had other interests that I wanted to pursue. I realized I could only do that if I sold the company.
When selling is a family affair
I had a family member working in the company – my daughter, Meghan. She had been a senior member of our team for 15 years, working in the warehouse and the office. She knew the business well. We had a conversation about whether she was interested in taking over the company. She wasn’t. Although she enjoyed working in the business, being the boss and managing a team is difficult. She’s not alone in those feelings. Recent research by Small Business Trends revealed that 89% of family members don’t want to take over the business.
If you do have family members involved in your business, I highly recommend that you consider outside resources to guide you in preparing for the sale. Mixing family and business can be challenging and the complexity of a transfer of shares can be overwhelming. Suggestions for guidance include Family Enterprise Canada (www.familyenterprise.ca) or the Canadian Association of Family Enterprise (www.cafecanada.ca). Learn as much as you can before you make any decisions.
When it’s time to sell, lean on the experts
As the business owner, you may not be the best person to present your company for sale. You may be too close to things, unable to see the bigger future picture. I received a variety of suggestions around selling my company, including reaching out directly to competitors to see if there was any interest. This is not a good idea. Competitors may be only interested in getting their hands on your financial reports (for comparison). Releasing financial information should NOT be where negotiations begin.
There are many M&A companies and business brokers that will work with you through the sale process, including valuation, reaching out to potential buyers, negotiations and finalizing the deal. I set up appointments with three M&A companies in the GTA and interviewed them to see what they could do for me. I also interviewed two legal companies to find a team with solid M&A expertise. It was a very helpful learning experience as I ended up with an expert team to guide me as I took my company to market. That extra time and effort resulted in three offers and a final sale that, in hindsight, I know I could not have achieved alone. It’s never too early to prepare yourself and your company for sale (even if you’re not quite ready to sell).
The last two years have been incredibly tough on businesses, particularly small ones. A recent BizBuySell Insight Report showed that “After nearly two years of managing through the pandemic’s fallout, many owners are deciding it’s time to sell. Retirement and general burnout remain the top two reasons for exiting, however pandemic fatigue specifically is moderately to extremely motivating 43% of owners to consider selling their business.” Sadly, a study by Small Business Trends, also updated in 2021, shows that 48% of business owners who want to sell have no exit strategy. Don’t put your life’s work in jeopardy. Plan ahead.
Advance preparation allows you to develop the expertise, knowledge and details required to build a stronger company today to ensure a successful sale tomorrow. Good luck!
¹Generational Equity has put these conferences on hold during Covid-19 and plans to resume them later in 2022, including in Toronto. Visit their website to learn more: www.generational.com
Would you like to learn more about my selling experience? Check out this podcast (#012 – July 7, 2020) with Jeffrey Feldberg of Deep Wealth.
About Doris Valade
Doris started her own business over 30 years ago, and successfully sold the company in 2017. She has sat on the boards of Food & Beverage Ontario, the Canadian Meat Council and the Canadian Spice Association. Doris has been included on the list of Profit magazine’s Top 100 Female Entrepreneurs from 1999 – 2005 and again in 2016.
Today, Doris keeps busy as a business and leadership coach, as she mentors and supports business owners and entrepreneurs through the challenges of running their business. You can request a free (no obligation) phone call and conversation with Doris by sending her an email request: firstname.lastname@example.org