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Could You Sell Your Company Whenever You Choose? Rest Assured When You Know These Facts

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If you own a successful company, you can rest assured that you will be able to sell it when you want for what you want, correct?

True or False?

The answer, though it may disappoint and confuse you is false. Even if you’ve received lots of calls and invitations from business brokers and M&A advisors saying they have buyers interested in your business.

Even if your company has been profitable or steadily growing for years.

Even if you have a hot product or service.

Even if you shop for the best broker offering you the best valuation number you can find.

Now that you know this, I hope some alarm bells are going off.

I hope that you continue reading to find out not only why this is the case, but what you can do about it so you don’t continue leading your business in a way that stops you from getting the return on your investment that your hard work and obvious success should bring.

Five Fast Facts

Print

  1. Only 10% to 20% of North American business owners are able to sell their companies. Want proof? Read about the latest statistics in Forbes
  2. The reason that these owners find buyers is because they make their companies saleable and transferrable long before they want to sell.
  3. If you want the greatest return from your business personally and financially then pay attention to the legacy you leave your employees, customers, supply chain and the economic community you live in, after you leave your business.
  4. While you may have heard there has been a huge spike in the amount of wealth searching to acquire businesses like yours, and 50% of all businesses in North America (3,500,000) are owned by people over 50 providing a massive supply, there is no demand for companies that do not meet a buyer’s investment (the reason for acquisition) goals. These statistics prove that the number of acquisitions have stayed within 4,000 to 7500 range year over year.
  5. The successful sellers take matters into their own hands by making changes in the business to better match their ideal buyer’s acquisition goals.

Want To Increase the Chances You Could Sell Your Business When You Want For What You Want?

Take This Quiz.

How You Leave Money On The Table Without Realizing It

To be able to grow and/or sell your business, whether a majority or minority stake, whether to family or employees, whether to a general manager or another entrepreneur, whether to private equity or another company, you need to know which strategies will help keep the money in your pocket and which myths and circumstances push your money into someone else’s pocket.

Which pocket will the money go into? Consider the question, and decide whether a or b will help you keep or grow your money, or whether you are leaving money on the table without realizing it. The answers follow after the quiz.

  1. You want revenue growth. Which strategy costs you more?
    • a) Increase prices 5% and keep costs the same.
    • b) Increase prices 5% while costs increase 6%.
  2. You want revenue growth. Which strategy puts money in your jeans vs someone else’s jeans?
    • a) You offer your customer a discount if they buy more of any product.
    • b) You offer your customer a discount only on lower margin products.
  3. You want growth. What’s the best solution to resolving cash flow problems so you have money to fuel growth? Which strategy leaves money in the banker’s pocket not yours?
    • a) Good relationship with the bank.
    • b) Systems in place for consistently bringing in new prospects, appointments and clients OR new leads who become loyal customers.
  4. A manager comes to you with a problem. Which management philosophy puts money in your jeans vs someone else’s jeans?
    • a) You listen to the situation and provide the solution.
    • b) You listen to the situation, talk over the pros and cons and let the manager make the final decision.
  5. Your credit line is creeping up. What’s the best next step? Which strategy keeps you flush?
    • a) Go to the bank and ask for an increase.
    • b) Look for profit leaks in your operation.
  6. Your top manager asks you if they can buy into the business. Which strategy puts money in your jeans vs someone else’s jeans?
    • a) You can’t imagine having to deal with the manager as a shareholder or partner and say no.
    • b) You explore the manager’s new interest to see what he or she understands about buying in and the ideas offered. You think about it.
  7. Your labour costs have gone up lately as the company has grown. Which financial system leaves money on the table?
    • a) You find out this fact at the end of the year when your financial reports come in.
    • b) You find out this fact when you get your weekly report about each project or store or division.
  8. Which belief system puts money in your jeans vs someone else’s jeans? The best way to extend the legacy of a business so it continues to reward the family and stakeholders is to:
    • a) Gift it to the family member active in the business.
    • b) Sell it to the family member motivated to acquire it
  9. Which strategy puts money in your jeans vs someone else’s jeans? The best way to extend the legacy of a business so it continues to reward the family is to:
    • a) Hire a capable GM to lead the company’s growth on behalf of the family.
    • b) Sell the business and leave the wealth to family members through the estate.
  10. Which belief system puts money in your jeans? A business should last as long as:
    • a) The owner or the owner’s family wants to operate it or lead it.
    • b) As long as the value it creates is relevant to the market place.
  11. Which circumstance puts money in your jeans? The right time to sell a business is when:
    • a) The management team has fixed the red flags to enable the company to grow to the next level.
    • b) The industry is facing challenges, the company is hard to manage and sales have been flat.
  12. Which opportunity puts money in your jeans? The right time to sell a business is when:
    • a) A business broker tells you it’s worth the number you can accept.
    • b) The ideal buyer is interested in acquiring the business.

The Answers May Be Surprising and Give You Ideas To Keep More of Your MoneyEaster basket on canvas background

  1. You want revenue growth. Which strategy puts money in your jeans vs someone else’s jeans?
    • a) Increase prices 5% and keep costs the same. It seems obvious. However many owners forget to create a plan for how to keep costs the same while they are focused on increasing prices. So the result they get is (b) when hoping that this price increase will result in revenue and profit growth. 
    • b) Increase prices 5% while costs increase 6%.
  2. You want revenue growth. Which strategy puts money in your jeans vs someone else’s jeans?
    • a) You offer your customer a discount if they buy more of any product.
    • b) You offer your customer a discount only on lower margin products. Your highest margin products give  you the greatest growth in profit. If someone needs a discount to make a sale, give it on the lower margin product or service. But make sure the buyer is sold on the value or benefit they will receive before offering any discount. Negotiating price often is a sign your buyer has unexpressed objections. 
  3. You want growth. What’s the best solution to resolving cash flow problems so you have money to fuel growth? Which strategy puts money in your jeans vs someone else’s jeans?
    • a) Good relationship with the bank.
    • b) Systems in place for consistently bringing in new prospects, appointments and clients OR new leads who become loyal customers. This sounds like the right answer. But what actually happens is that the credit line creeps up without you discovering why and all of a sudden you don’t have the luxury of time to build in that new and improved lead generation system or better marketing strategy to bring new customers to your door. So then you need a). But a good relationship doesn’t guarantee a credit line increase.
  4. 4b1b57df-6829-4ce6-8cac-693a193ba946A manager comes to you with a problem. Which management philosophy puts money in your jeans vs someone else’s jeans?
    • a) You listen to the situation and provide the solution.
    • b) You listen to the situation, talk over the pros and cons and let the manager make the final decision. If you want to empower your managers don’t do their thinking for them. Let them experience how to make better decisions themselves. Every time you do their final thinking for them, you make the business dependent on you. You also signal that you don’t trust the people you chose to hire and pay good money for. This nasty domino effect then produces managers who you don’t trust because they aren’t self-responsible. Yes, just like raising kids, you have to let your managers stumble and fail a few times so they learn how to do it better next time. This is what it means to mentor your team.
  5. Your credit line is creeping up. What’s the best next step? Which strategy keeps the money in your pocket?
    • a) Go to the bank and ask for an increase.
    • b) Look for profit leaks in your operation. An obvious right answer, but look at the circumstances you were facing the last time you needed an increase. Did you know six months in advance? If you did, then you had the time to look for ways to increase profits by getting paid sooner, improving productivity to reduce costs, increasing prices without increasing costs, and ensuring your production workflow across all departments functions like a happy engine. Conflict between departments? That’s a profit leak.
  6. Your top manager asks you if they can buy into the business. Which strategy puts money in your pocket?
    • a) You can’t imagine having to deal with the manager as a shareholder or partner and say no.
    • b) You explore the manager’s new interest to see what he or she understands about buying in and the ideas offered. You think about it. Don’t say yes or no definitively. This is a moment when  you want to ensure your manager feels heard, respected and valued. Otherwise you could see all that knowledge walk out the door. The next step is for you both to be educated in what it means to buy into a business so you can each make an informed decision. Being a shareholder doesn’t turn that person into a managing partner. 
  7. business_growth-120x128Your labour costs have gone up lately as the company has grown. Which financial system puts money in your pocket?
    • a) You find out this fact at the end of the year when your financial reports come in.
    • b) You find out this fact when you get your weekly report about each project or store or division. You  probably know this. But your controller can’t get that kind of report out of your software. Or your software can’t make the report without a customization. Or you would have to change all your accounting categories to be able to know what was  happening in each project or product category. Your bookkeeper doesn’t know how to set up activity based account. Yup. This is a big project. So what’s more important? The hassle factor of overhauling your accounting system or trying to fix the fact that you didn’t make the profit you were hoping for last year? 
  8. Which belief system keeps the money in your jeans ? The best way to extend the legacy of a business so it continues to reward the family and stakeholders is to:
    • a) Gift it to the family member active in the business.
    • b) Sell it to the family member motivated to acquire it Having a stake in the business means you know the person responsible for leading the next level of growth is committed and able to do the job. It’s your financial future at risk if they fail. Read Dr. Tom Deans book “Every Familys’ Business”.
  9. Which strategy adds money into your pocket vs bleeding it off into someone else’s? The best way to extend the legacy of a business so it continues to reward the family is to:
    • a) Hire a capable GM to lead the company’s growth on behalf of the family. A growing business that you don’t have to lead anymore will sell for far more one day than one where you, the owner, are still material to the business or profit growth is flat or uneven.
    • b) Sell the business and leave the wealth to family members through the estate.
  10. Declining-Revenue-Impacts-a-Business-Sale-270x212Which belief system puts money in your jeans? A business should last as long as:
    • a) The owner or the owner’s family wants to operate it or lead it.
    • b) As long as the value it creates is relevant to the market place. This is a golden rule. You are in business to solve a problem or provide a value service or solution for your customers and clients not to support the family. If the value your company produces erodes, there is no reason for the business to continue.
  11. Which circumstance puts money in your jeans? The right time to sell a business is when:
    • a) The management team has fixed the red flags to enable the company to grow to the next level. Yes, this seems like the smart answer. Except that the reason 80% of companies never find buyers is (b), they sell when these circumstances make it too hard for them to continue. By then it’s too late to make the company saleable and transferrable.
    • b) The industry is facing challenges, the company is hard to manage and sales have been flat.
  12. Which opportunity keeps money in your pocket? The right time to sell a business is when:
    • a) A business broker tells you it’s worth the number you can accept.
    • b) The ideal buyer is interested in acquiring the business. Hands down this is the reason that companies get sold. Value is in the eyes of the buyer. What your accountant or business broker says the company is worth is irrelevant if a buyer doesn’t see that value in the business. To learn more about how this value is created and to see your company from a buyer’s perspective, get “How To Increase the Value of Your Business BEFORE You Sell… And Make It More Profitable Now”

There are more questions like these that you will want the answers to. If reading a book isn’t your thing and/or you want to discuss the areas of your business that will give you a better return financially, personally and through your company’s legacy, call 604-306-7707… regardless of when you want to eventually sell. You are your company’s primary investor. You deserve a better return on your investment now, not just when you sell one day.

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Lorraine Rieger McGregor

Lorraine McGregor is the co-founder of Spirit West with her husband and business partner, Rob. As a management and marketing consultant, she is the author of 4 books on how to increase the value of a business, how to stand out in the market place and how to prepare a business so it becomes a saleable asset. Lorraine is the past-President of the Association for Corporate Growth, Vancouver chapter and a frequent expert speaker on how to grow, position and sell a business for maximum return on investment.

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