Bart is burnt out and ready to sell but I’m afraid it’s for the wrong reason. A tale from the trail of business transitions that you need to know about. Hope you find it useful.
Bart writes: Thanks, Tom, for the personal message (I told ya I respond to your emails).
I’ll try to summarize my situation. Been in business 35+ years and trained two employees to succeed me at different times. They each had a non-compete which I created but it turns out that they were not exactly enforceable. Well, each quit and went to work for competitors (two different companies). Now they work at the same printer and have found an investor that will fund them. They want to buy my shop for $300,000.
I have not formerly listed the business anywhere and really haven’t spoken about it out loud except to a few friends.
Now I’m faced with losing my general manager and probably my second largest account. I have an appointment with an attorney today to outline a sale agreement and non-disclosure.
I’m stressed about it, mostly I’ve put it on the back burner not believing anything is going to happen… I especially can’t see the money guy coming through, whoever he is.
That’s the jest of it, probably a story you’ve heard a thousand times. I appreciate your participation and I know you consult for a living. Let me know how we can proceed.
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Well, Bart, selling for $300k might be a good deal but then, of course, it depends on a couple factors. I’m most concerned about the REASON you are considering selling. Then it, of course, depends on whether you’re really ready to retire and if you’re getting a good deal or not. Let’s take first things first.
Why are you selling?
Appears it is because you’re facing the loss of a key employee and potentially a big account. Ask yourself this, “If I was earning $200k per year, had a solid staff and bright business future, would I be thinking of selling?” Many say, “No, if things were that good, I’d want to keep going.” Okay, if that’s the real answer then the solution is to fix what’s wrong with the business.
Solution for the tough situation is be organized so you can: get jobs out, get jobs in and get paid. I imagine that if we scratch the surface, we’ll find a lot of specific moves you need to make to get your business back in shape. Can’t tell you what they are until I know the specifics, but just know it can be done. And yes, we do offer a thorough Business Review which will enable us to understand your situation and help you find a way forward. Message me at tom@cprint.com if you are interested.
As for bringing up a worker through the ranks or an employee so you can sell to them; the solution is the same in both cases. Here are three articles that will help you with that and, of course, we can help you develop a workable plan if desired:
Successor Tracks for Transition https://cprint.com/cash-successor-tracks/
Executive Track https://cprint.com/cash-step-one-executive-track/
Real Work Experience https://cprint.com/cash-real-work-experience/
Why Sell If Things Are Good?
That’s the time to sell as selling (retiring) should be an orderly process. You should sell when you are at the top of your game and ready to retire, not because you’re facing a tough situation.
This is one of the biggest mistakes we make.
There’s a name for this that escapes me right now but we humans typically base our expectations of the future based on our experiences; not on future realities.
In short, it means, I’ll quit when I’m hit with a big problem. If sales have been growing; we expect them to continue to grow. If everything is working well; we expect them to continue to work well and dismiss having to replace a key worker. If cash is good; we expect cash to continue to be good. If our health is good; we expect our health to continue to be good. And on and on. We just bury our heads in the sand until we reach a point when something happens. This is what I think is happening to you, Bart.
Solution here is to plan an orderly retirement or sale of the business.
Are You Ready to Retire?
I’ve broached this before. Two things you need to know and the biggest of which is: what is your next career? We have to know what we are going to do next even if it is retirement. What are you specifically going to do? When you want to do that more than what you are doing now, then you’re ready. And then, of course, “How much money will you need and how much do you have?” Here are two articles attacking these questions.
What’s Your Next Career? https://cprint.com/cash-whats-next-career/
How Much Will You Need to Retire? https://cprint.com/cash-much-will-need/
In your situation, Bart, I don’t hear that you are ready to retire; rather that you want to retreat from the business problems. If so, that’s a bad time to sell or retire.
Is Selling While Burnt Out a Good Deal?
This depends on the value of your business.
Just as a guide and not as a way to value a business – the average printing company has sold for 56% of sales over the past twenty years (not much variance up or down in this ratio) but that includes a lot of variables.
A person can have a piece of property valued at $500k but sell it for $300k because they need to unload it quickly (divorce or death in family) and then others might be valued at $500k but someone be willing to pay $800 because they just want that property.
And that’s why the statistic is not a way to value the business… it’s just the result of negotiations between buyers and sellers. Biggest thing is to use this only as a “ball park” number.
Using that “rule of thumb” it would put a $500k business selling, at average, for $280k. Now there are reasons why it would sell for more as well as sell for less. Earnings is the prime driver of value but then you mention the loss of a key worker and a big account.
More information on valuing your business:
What’s the business worth? https://cprint.com/cash-whats-business-worth/
EBITDA Method of Value https://cprint.com/cash-ebitda/
Conclusion of Burnt Out
Basic point is know yourself first and understand why you want to sell. If it’s for good, reliable reasons then go for it. We should all do what we want to do.
Now, yes, we do estimates of business values and help folks “fix” the business to either sell or continue operating. We also help in transitions to family members or workers. Don’t know that you need any of that right now but always willing to listen.
Guess, the real question is: if you got $300k cash for the business, would you be able to retire or do whatever you wish to do next? Where are you with that?
Tom Crouser
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