FREE TRAINING: 3 Keys to Sell Your Business with Confidence

Time to Look in the Mirror

There are times when some conversations are very difficult. Such was the case when I sat down with Ryan (not his real name). He summed up our meeting saying this, “I guess it’s time I look in the mirror and tell myself the truth. I’ve done a lot of work in this business but don’t have much to show for it.” 

Ryan and I were meeting to review the valuation report I prepared for him. Though his business had revenue of $12 million last year, inflation took a toll on his materials and labor costs, resulting in the third consecutive year of losses. Ryan was keeping himself afloat from the rent the business was paying him on the building that housed the company. 

Ryan’s company employs 95 people, most are at or just above the minimum wage level. You can imagine that people issues are always on his mind. “My turnover the past 3 or 4 years has been about 30% a year, it’s tough keeping this place fully functional.” Meanwhile, he has had difficulty maintaining predictable access to some of his necessary raw materials. In an effort to not be overly reliant on an erratic supply chain, Ryan decided in July to overstock inventory. Suffice it to say, he solved one problem by creating another one. He justified it this way, “I’d hate to lose a customer because I can’t deliver a finished product, so I’ve had to let my inventory get a bit excessive.”

I had to be the bearer of bad news, but I told Ryan the business might not be sellable at any price in the face of his labor and supply chain problems. While technically not bankrupt, the business doesn’t presently offer any transferable buyer. I told him it’d be hard to find a buyer that could suddenly change the fundamental issues in his business. While the news I delivered was hard, he handled it well. “Jim, I know what you’re saying. Trying to manage all this, I’ve aged 20 years in the past 5, it’s just time I let go.” 

Ryan and I have not discussed specific next steps but liquidating inventory and then closing his doors may be his best solution. Fortunately, his Balance Sheet is not gummed up with debt, so he’ll be able to walk away without anyone holding the bag. He can then focus on selling his most valuable asset, the real estate, and that will give him more than enough to enjoy a wonderful retirement.

Looking in the mirror can be painful (literally and figuratively). But more painful is when we look and don’t see the reality of what’s looking back at us. I’m glad Ryan was able to see it, admittedly with a little help from me. But to his credit, he looked in the mirror and saw a business that, although it has lots of revenue and people, was not headed in any direction worth saving.


The following two tabs change content below.

Tennessee Valley Group

Jim is an attorney (non-resident status with the Missouri Bar) and though he no longer practices law, he has read and negotiated enough legal documents to fill a cargo tanker. He has an MBA from Harvard Business School and knows how Wall Street and private equity operates. Jim is a Tennessee Supreme Court Rule 31 listed general civil mediator with tons of experience helping business owners (large and small) work through sensitive problems to achieve winning results. He is the author of "Home Run, A Pro's Guide to Selling Your Business, Seven Principles to Make Your Company Irresistible."

Latest posts by Tennessee Valley Group (see all)