The Gambler Story: When on the Growth Scale Do You Sell?

Kenny Rogers had it right. You gotta know when to hold ‘em, know when to fold ‘em, know when to walk away and know when to run. That’s great advice for gamblers, and for entrepreneurs. For me now, it’s time to fold ‘em and walk away.”

Ross (not his real name) didn’t strike me as the type who would listen to country music. Born and raised in the Northeast, he came to Nashville when his wife took a corporate role with one of the city’s preeminent hospital companies. Ross asked me to help him sell his company, but before I would commit, I wanted to understand his motivation to fold ‘em because what he described sounded too good to be true.

We’re growing at double-digit rates, profit margins are improving as we gain economies of scale, and I have the best team I’ve ever had. Carolyn and I just returned from a three-week trip with the kids to Australia and I only called the office once.”

“So why sell now?” I asked. “You seem to be at that place where every business owner wants to be. Your business is profitable and growing, you don’t have to put in 12 hour days anymore, why take your chips off the table now?”

Ross literally laughed at my question, then said, “Jim, I’m not all that smart, but I know that most good things don’t last forever. I don’t want to be known as the entrepreneur who held on too long.”

Ross’ business will sell for high seven figures, so he’ll never have to work again once the business is sold. However, given his current rate of growth, if he waited another three or four years to sell, he could easily double his company value and create multi-generational wealth.

That is, if everything stayed on course. But Ross’ decision to sell now is premised on the belief that things change….economies go into a recession, competitors see your success and come after you, key employees decide to retire or change jobs. You see, change is unpredictable. It could be anything that causes the upward climb in a business to become a slip into mediocrity.

“But why now?” I again asked Ross, “What’s causing you to pull the trigger and prepare to sell in early 2018?” His response is one I am hearing more and more as we end 2017. Ross said, “The bottom line for my decision is the length of the economic recovery. We’re in the longest recovery in US economic history, the stock market is at all-time highs, primarily because interest rates have been held at all-time lows. This formula for growth can’t go on forever.”

I am not an economist, I can’t predict when the historic growth cycle we’re now in will go the other way. But I do know that Kenny Rogers had it right. Even when you’re at the table winning every hand, there comes a time when you have to fold ‘em and walk away. It’s a decision I’ve seen a lot of smart entrepreneurs make in 2017, I think I’ll see more in 2018.

 

JIM CUMBEE is President of Tennessee Valley Group, Inc. a retainer-based business brokerage and transition mediation firm in Franklin, TN. Cumbee is an attorney and has an MBA from Harvard Business School. He has a wide range of corporate and entrepreneurial experiences that make him one of the most sought-after business transition advisors in the state of Tennessee.

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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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