Is Your Business Better Off Without You?
You may be in the midst of a mid-life crisis, but it’s more likely that your business now needs someone other than you to grow it to the next level. Rather than take the time and energy required to learn a new set of skills, it may be time to ask an important question:-
When is it time to sell my business?
The entrepreneur who can start a business is often not the same person who can sustain a business and help it mature into a bigger company. And even if you recognize yourself in that concept, it is not time to call a business broker just yet!
Your business is ready to sell when it can run without you. AND…the further along in the growth cycle it is the more the business is worth. To explain what I mean, let me share part of an article by Mark Wardell of Wardell Professional Development who deftly identifies the four stages of business development as they correspond to the value of the business.
Owner Driven Business
The owner makes it all happen. Because this level of business is highly reliant upon its owner, the risk of the business losing its profitability following a change in ownership is at its highest. (This is why small businesses like this typically sell for only 2-3x earnings)
People Driven Business
Key people other than the owner make the business happen. At this level, succession related failure is reduced, but it still plays a role due to the fact that key people may leave and take valuable information and even customers with them.
Process Driven Business
The business is run by systems which greatly reduce the risk of failure after a change in ownership. At this level, systems are in place to ensure that operations continue according to the Plan, with or without the owner or key employees so the business is set up fairly well to run itself. It’s obvious why this business has greater value.
Culture Driven Business
A Culture Driven Business: In this environment, the culture (driven both by systems and key people) makes the business happen. The culture indoctrinates new hires into an environment of continuous improvement, based upon management and information systems already in place. (These are businesses that sell for 6-12X earnings since the risk is lower.)
As a business moves from one level to another, the risk for the purchaser is reduced, thereby increasing the value of the company significantly to a prospective buyer. It takes effective planning and employee empowerment to get a business to progress through each of these phases. Some entrepreneurs can do it if they can accept that this is the way to go. If not, then it may well be time to sell, but understand that the purchase price will not reflect the full potential the business has.
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Coaching Entrepreneurs to Ready Their Businesses For Sale
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“Micro-managing, Benign Dictator” or “Autocrat” are terms which the employees of many Level One & Two companies use to describe their owners, even when they love them as people. If the owner cannot change, the business probably has just outgrown them. For the sake of the future of the business, a sale may be the best action. Even though value for the business has not been maximized, it may already have been maximized for that owner.
In fact, it’s frequently businesses operating somewhere between Level Two & Three that are most attractive to private equity groups. The Private Equity Group’s (PEG) objective is to purchase the business at a lower price and guide the former owner in further reducing their personal control and establishing systems while seeking through the planning process to develop the business into a Level Four: Culture Driven Business. When the PEG is successful, (even if they must replace the previous owner) they are able to later sell the business for a greater multiple of EBITDA. Likewise, the amount of EBITDA of a Level Four business is also typically much higher. The PEG mantra for investment success; higher earnings and higher multiples.
Business Broker Services
904-647-4711
Sell My Business?
Your business can be sold when it can operate without you
– and –
When your process is scalable, repeatable and perceived valuable.
That may not be today. Yet, you can get into one of the models that make it transferable.
Our Happy Clients
“We are very glad we used John. He found us a great buyer and facilitated a smooth closing.”
“John’s extensive experience in the business brokering industry was consistently demonstrated with his knowledge and professionalism.”
“We used John Geiwitz to sell our business of 35 years. “
Although being nervous to start the process of selling, John walked us through each step and never pressured us in any way. He spent a lot of time with us and was very thorough and honest in explaining what would take place throughout the selling process. John had great communication skills and a great response time. We felt he worked very hard on finding the right buyer for us. He was also extremely professional and helpful through the negotiating and closing process. We would definitely recommend John. Thanks John!
