John (not his real name) called me the day before Christmas to tell me he was interested in selling his manufacturing company. We met a few days later and he gave me a tour of his plant. His company produced a high-margin product that provided a mission-critical function for the customers they supplied. As I walked through the plant I thought about several private equity firms that would love to buy the company. After the tour, John told me he was 69 years old, ready to retire and be with this children in Atlanta. John also told me he thought “the old guy” (that’s how he referred to his 75-year old partner) was on board with this 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 frustrated; he was stuck and I was disappointed for him. Though there is no way to know exactly when you should exit from your company, I’m fairly certain it’s before you reach your mid-70s. Which got me thinking, why are business owners so reluctant to prepare for a timely exit from their business? Then I remembered the common questions I hear when I talk with business owners about selling:
Will my employees and customers find out?
How much of a distraction will it be?
Who can I trust to guide me through this?
See the common theme to these questions? Fear. Most business owners fear the process of exiting from their business. In fairness, I’ve heard horror stories that justify some of that fear. Those horror stories usually involve an unscrupulous or idiot advisor (my mom would not like me using that adjective but it seems to fit here). This kind of advisor makes promises they can’t keep, creates unrealistic expectations, and puts their interests ahead of their business owner client.
I’m betting that somewhere in his long business career, John’s partner had a bad experience with a business broker, and because of that he’s reluctant to go through the process again. So although he and John need to sell their business, it might not happen before fate intervenes.
If I ever got the chance to talk with John’s partner, I’d tell him that not all business brokers are sharks, but I know words are cheap. Indeed, actions speak louder than words. But every business owner needs to hear that selling a business usually doesn’t happen exactly when or how you want it to happen. Yes, it can be a scary process, but if you let that fear stop you in your tracks, you are likely hurting your employees, customers and your own financial best interest.
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. The names and fact patterns above have been changed to preserve the parties’ identities.
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