A lot of our clients have been thinking about selling lately. I can understand this, there have been a lot of significant external factors affecting our businesses lately and at times it can seem overwhelming. However, you need to take a long-term view when considering liquidating any major asset. There will be local peaks and valleys for just about any investment but it would be a mistake to sell at a 52 high when the next year will produce another 52 high.
If your long term plan is to exit the business in order to retire or transition the business to the next generation of ownership, selling at a local peak can make sense. However, buyers of businesses love these troughs. We routinely advise our clients to go shopping during periods like this one. It’s a buyers’ market to some extent. Owners are tired and the government seems to be bent on making owning and operating a business more of a challenge. But just like investing in the stock market, a good recession, or head wind period is an excellent time to go bargain shopping.
So if you’re up for it, I recommend that you go bargain shopping at times like this that seem to be opportune times to make the jump and sell. If you’re not ready to buy, maybe you don’t have the capital etc. then at least hang on to your business and don’t sell when there head winds even if it’s a local peak in demand.
I have advised owners for years that it’s okay to listen to offers, but hearing offers for your business can be heady and emotional so it needs to be done with discipline. It’s important to remember that transactions, buying OR selling, are simply tactics that can be employed to achieve strategic goals. So before any transactions are seriously considered, one needs to be clear about the business’ strategic goals. If expansion through transactions or an exit from the business support those goal, further consideration may be warranted.
Call To Action
Establish a strategic plan supported by explicit strategic goals. Then the question of strategic transactions can be considered.
1. Workshop initiatives to accomplish the strategic goals including transactions if appropriate;
2. Set a timeline for consideration of transactions (e.g., biennial review of market transaction prices and buyer or seller interest);
3. Know the value of your business and similar businesses by getting objective assessments, this will resist the temptation to sell at a local peak or buy when valuations are peaked;
4. Establish a budget and schedule for considering offers including due diligence and integration planning this is important to limit the investment the organization makes in considering offers; and
5. Establish a plan for integrating the business, this is critical to ensure a quick and direct integration of your new purchase. This is where many transactions lose large amounts of their value.
I hope you found something to apply to your business in this MBR. Let me know either way.
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