“I’m Ready to Sell but the Old Guy Thinks It’s Too Soon.”

John (not his real name) called me the day before Christmas to tell me he was interested in selling his company. We met a few days later at which time I learned he had a partner who was 75 years old. John was 69. John gave me a tour of his plant, and it was obvious he had a strong company. Their experienced workforce produced a high-margin product that provided a mission-critical function for the manufacturing plants they supplied. As I walked through the plant I thought about the dozens of private equity investors who would love to buy the company. After the tour, John told me he was ready to sell and he thought “the old guy” (that’s how he referred to his 75-year old partner) was on board with that decision. John asked me to research the company’s valuation, and we agreed to regroup after the first of the year.

A couple days after Christmas John call to tell me he and his partner could not agree to sell, asking me to put our process on hold. I could tell John was disappointed; he was stuck and I was disappointed for him. I didn’t say this to John because I don’t know the perfect time to exit from a business, but I’m fairly certain it’s before you and your partner reach your late 60s. Which got me thinking, why are owners so reluctant to have an exit plan for their business? I started to jot down the questions I hear when I talk with business owners about exiting …

How much will it cost?

Will my employees and customers find out?

Who can I trust to guide me through this?  

How much of a distraction will it be?  

I suppose the bottom line is this …. business owners fear the process of exiting from their business. Based on horror stories I have heard from owners about how their exits were handled, I can appreciate why the process generates fear. Let’s call a spade a spade …..there are business brokers roaming around these days calling themselves “exit planners” but all they want is a fee to list the business for sale then wait for a buyer to miraculously show up.  Any wonder 80% of the businesses for sale do not get sold? (per business transition expert Tom West).

Speaking in very broad strokes, there are three components of a professional exit plan: 1) a market valuation of the business; 2) a plan to optimize the business’ “sell-ability”; 3) a plan to optimize the seller’s post-sale life, including tax minimization strategies. A professional exit plan takes at least 6-12 months to develop BEFORE the business goes on the market.

Is it too late for John and his partner to have an exit plan put in place? Well, actually, yes it might be too late, but there is no downside in starting …. while they might have justified fear about the process, John will be in a better position once “the old guy” decides it’s time to sell. Let’s hope “the old guy” can make that decision on his own, before other circumstances force the decision on him.

Moral of the week: plan to sell your business before you have to……exit plans prepare you for an uncertain future.

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Tennessee Valley Group

Jim Cumbee established Tennessee Valley Group to help business owners fulfill their dreams for life after business ownership. It’s a mission that his 30+ year career history had prepared him well for—in addition to being an attorney, transition mediator and business broker, Jim has been a buyer, seller, and entrepreneur. His broad range of experience gives him unique insight into how business buyers and sellers can achieve their goals.

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