Sometimes the idea of selling a business doesn’t begin with the owner at all. An M&A firm makes an unexpected call. A potential buyer expresses interest. A competitor sells. Suddenly, something that had always been somewhere off in the distance becomes a real possibility.
Often, though, that outside event simply brings to the surface thoughts that were already there. After years of running the same business, the owner is tired. Financial results may have slipped, problems that once would have been attacked aggressively aren’t getting the same attention, and the enthusiasm required to make another round of changes isn’t quite what it used to be.
That’s when the owner begins asking, “Maybe it’s time?” But considering a sale and being ready to sell are two very different things.
WHY ARE YOU THINKING ABOUT SELLING?
Before talking about valuation, potential buyers, multiples, or marketing the company, I think we need to have a more basic conversation. Why is the owner considering a transition in the first place?
There isn’t a wrong answer. Age, burnout, declining financial performance, family circumstances, the absence of a successor, or simply wanting to do something different can all be perfectly legitimate reasons. Sometimes an unsolicited inquiry is enough to cause an owner to seriously consider a possibility that had previously been little more than a passing thought.
What matters is understanding whether the owner genuinely wants to make a transition or is simply attracted to the idea of one. Until that distinction becomes reasonably clear, discussions about valuation and potential buyers may be getting well ahead of the most important decision.
SELLING THE BUSINESS CHANGES MORE THAN YOUR BALANCE SHEET
For someone who has spent 20, 30, or 40 years building and running a company, selling isn’t simply a financial transaction. The business may determine where you go every morning, who you talk to every day, the problems you’re responsible for solving, and a significant part of how you define yourself.
Then there is the practical question: What comes next? Family financial responsibilities may remain, continuing income may be important, or the owner may simply have no interest in retiring. Even when the financial terms make sense, the owner still has to picture what life looks like after the transition is complete.
Those aren’t reasons not to sell. They are reasons to understand what you’re really deciding before beginning a process that becomes increasingly difficult to stop once advisors and prospective buyers become involved.
THE BUSINESS AND THE OWNER CAN BE ON DIFFERENT TIMETABLES
Throughout this series, we’ve looked at many of the things that can make an offsite manufacturing business more—or less—attractive to a prospective buyer. We’ve considered first impressions, owner dependency, management depth, financial information, customers, systems, costs, and the enterprise’s overall health.
A company can be well positioned in many of those areas and still have an owner who isn’t ready to sell. The opposite can also be true. An owner may be completely ready to move on, while the business itself needs considerable work before it can go to market.
Recognizing that difference early matters. If the owner isn’t emotionally prepared to make a transition, months of preparing information, talking with buyers, and negotiating terms may simply lead everyone back to the question that should have been answered at the beginning: Do I really want to sell?
THERE’S NOTHING WRONG WITH NOT BEING READY
Owners sometimes feel that once they’ve started exploring a sale, they’re somehow committed to following through. They’re not. A conversation about transition can result in the perfectly reasonable conclusion that now isn’t the time.
Discovering that early may be one of the most valuable outcomes of the process. It gives the owner an opportunity to address weaknesses in the business, strengthen management, improve financial performance, and think seriously about what the next chapter should look like. Six months or two years later, both the owner and the business may be better prepared.
KNOW WHAT YOU HAVE BEFORE DECIDING WHAT TO DO WITH IT
Once an owner decides they genuinely want to pursue a transition, another basic question follows: What exactly do I have to sell?
A factory, equipment, backlog, and financial statements are part of the answer, but they don’t define the entire enterprise. Management depth, customer relationships, systems, culture, operational discipline, and the business’s ability to perform without constant owner involvement all influence what a prospective buyer is really considering.
Understanding those strengths and weaknesses before entering the market gives an owner something equally important: choices. Problems can be addressed before a buyer discovers them, expectations can become more realistic, and the owner can decide whether selling now—or improving the business first—is the better course.
THE FINAL QUESTION
Bill Murray, Advisor, [email protected]
Preparing a business for ownership transition takes work. Preparing the owner may be just as important.
Before asking what your company is worth, who might buy it, or how quickly a transaction could be completed, start with the questions that don’t require a spreadsheet: Why am I considering selling? Do I really want to do it? And what do I want life to look like afterward?
Then comes one final question: If the right buyer showed up tomorrow, are you actually prepared to say yes?
Thinking About the Future of Your Offsite Business?
You don’t have to decide today that you want to sell in order to begin thinking seriously about transition. Understanding where both you and your business stand before making that decision can create considerably more options later.
At Offsite Innovators, we work confidentially with owners who are considering what’s next—whether that means preparing for a sale, positioning the business for a future transition, or simply determining whether the time is right to begin the conversation. If you’re asking yourself some of these same questions, we’d welcome a confidential conversation.
