Time to Sell Your Business? Trust Your Heart

“Why should I sell? The way we are growing we’ll double our value in no time!” Though we were meeting at 6:30 that morning, he didn’t need coffee. Randy (not his real name) lived a caffeinated life. He ran at a fast pace, the success of his company was evidence of that.

But Randy seemed ready to slow down, maybe take some chips off the table. A few weeks earlier, I had reviewed Randy’s business and told him how much he would make if he sold the business that year. I also projected what he might make if he waited a few years to sell. Given his incredible growth rate, he would likely double his value by waiting just three or four years.

But Randy was torn; he knew he could wait and likely make more, but he was a bit bored and tired of the travel. “Ok, I know I make more if I wait, but is there any logic in going ahead to sell now?”  My first thought was to say, “a bird in the hand is worth two in the bush.” But I never understood what that meant, and Randy didn’t seem in the mood for glib retorts.  So I offered three observations as to why he should sell now, even if it meant walking away from what could be a bigger pot of gold in a few years.

The economy

I first pointed out to Randy that we are in an unprecedented period of very low interest rates, and no economist believes that is sustainable. Once interest rates begin to rise, no one is sure how the economy will react. Second, though the stock market has seen a dip this year, the  stock market is still trading at all-time highs. How sustainable is that? Finally, the low cost of oil has been a wonderful boon for consumers, but like low interest rates and the high stock market, it’s hard to see how the low cost of oil is sustainable, and indeed the price has recently begun to climb.  While no one can predict the direction of markets (don’t trust those who say they can), it’s reasonable to believe there are at least some economic disruptions in our future, sooner than later.

The competitors

Randy is fortunate that his competitors haven’t yet shown much interest in the niche he serves. Having patents on his designs gives him some comfort that his niche can’t be quickly ripped off.  However, Randy knows the value his product brings to his customers is so significant that sooner than later he’ll face competition, likely stiff competition. Of course, the big boys tend to throw a lot of resources at the market. Right now, Randy is the big fish in the pond. But it’s likely there’ll be whales swimming around the same waters sooner than later.

The change

I asked Randy how his daily role in the business has changed since his hyper-growth stage started. “Well, truthfully, it’s gotten to be a bit of a pain in the backside, if you get my drift.” He went on to describe how he’s moved further from the design and engineering process that he loves to now having to spend more time on accounting and sales management.  I can do that stuff ok,” he said, “it’s just not my strong suit.” I told Randy this might be another sign it’s time to sell his company.  As the business grows, it gets more complicated and there are more moving parts. Randy said he has to hire new employees, bring in more senior-level management, attend more conferences, etc.  All of that “business stuff” is taking Randy away from the passion that got him started in the first place. I told him this kind of job frustration is often the catalyst for an entrepreneur to sell their business.

Whether he sells in 2018 or waits a few years, Randy is going to do very well. But holding on too long can have its downsides. My final comment as we were leaving Starbucks that morning… “Randy, you never know the perfect time to sell a business but when your heart says it’s time, it probably is.”

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 Tennessee and Kentucky.  Cumbee is listed by the Tennessee Supreme Court as a Rule 31 General Civil Mediator.

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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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