I spent half of last week doing a “business sale threat” analysis with owners who are ready to sell their $1.5 million printing business. What’s that? Well, it’s an onsite visit focused on the issues that will either keep the business from selling or selling for less than it should. (Yes, I’d love to come out and visit you. Message me at tom@cprint.com for more information.) In the meantime, here are a items that crossed my desk in the last few weeks which fall into the category of threats to the business sale.
What Are the Business Sale Threats?
Don’t Shortchange Yourself: yes, printing businesses sell for cash, even today. Yes, printing businesses still sell. Don’t convince yourself otherwise. I know of one deal like this going down within the month that is being sold to someone outside the industry for cash in the $400,000 range. Another is with a buyer inside the industry for nearly half million in cash. Also know of several who have convinced themselves otherwise so they’re gonna get little. So yes, you can get cash, if you aim for it. If you aim for it and you don’t get it; well, there’s still other options available.
Don’t Assume: many assume their only choice is to sell their accounts to another printer for a “commission based on future sales,” so they shoot low from the get-go. Aim high first and then work your way down.
Who is the Best Buyer? My priority list remains as: first, someone outside the industry with all cash. Second, it is someone inside the industry who will pay all cash. Third, find someone knowledgeable of the industry that you are willing to carry some or all of the financing (paper). They could be someone working for you, in fact. Then, fourth, if all else fails, find a printer down the street who’s willing to pay you a commission based on future sales to “your” accounts. Too often, folks think this last concept is their only choice. It’s not. Did I mention that before?
Brokers: hardest thing to do is to run your business and sell it at the same time. That’s where the broker comes in for they are especially useful in reaching people outside of the industry. If you don’t know of a candidate that’s outside or inside the industry who is willing to pay you all cash, then you need to work with a business broker, I don’t care what you think of them. They sell the vast majority of all businesses in the country as real estate agents sell the vast majority of real estate. Number of reasons to use one but the most pertinent one in my opinion is that you must run your business while you sell it. That’s very hard to do. Sales should be going up, people in place and trained, and the business reaping good income (profits). What happens mostly is that once a person decides to sell; we often retire in place and let the business coast. Since it takes several years normally to sell; then the owner puts themselves in a pickle should the business not sell and they have to rejuvenate it.
Stinking Thinking about Brokers: recently ran into an odd thought about brokers. Owner told me that he wasn’t going to use a broker because they were only interested in selling businesses that would fetch over $1 million in sales. Wrong. Now, brokers often will not list companies without $100,000 of Income before Owners Compensation but never ran into the $1 million sale minimum.* Anyway, my friend told me this was his understanding so he was focused on approaching other printers to sell his accounts. Not only is that stinking thinking, but was a bad assumption on his part. Our office contacted five brokers in his area, talked to three and all three were interested in taking his listing. It took us only a couple hours to find that out, so don’t listen to folk wisdom or box yourself in with your own stinking thinking. *Businesses with less than $100k income before owners can still be sold though. Just saying…
Computerized estimating programs: another owner was going to save money by not computerizing estimating, etc. Rather he thought he’d leave it to the buyer to do so. Oops. That’s more stinking thinking. A vast majority of today’s printing comes from prior jobs as either reprints or the same job only different (annual report, for instance). Any knowledgeable buyer prefers to have customer history (let alone receivables and more), at their fingertips through a full management information system so they’re going to mark your business down if it doesn’t have one. Even if you’ve computerized within the last year, that’s something although most would prefer three to five years history (before that isn’t really material cause if it hasn’t been reordered in five years; well, it’s highly unlikely it will be).
Orphaned Computerized Estimating: say you haven’t computerized but you plan to put it on the market within two–five years; don’t buy a cheap system, rather go with one of the two current industry standards: PrintSmith or Printer’s Plan. Why? Buyer can be more confident that the program won’t end up being abandoned (orphaned); it’ll be easier to find workers who are already familiar with the program; but, most importantly, when the buyer does due diligence he or she will find the program is a reliable backbone of our industry.
Hostage Situation: have you abandoned your customers to your workers? Are they the ones who are really in control of the accounts or is it you with their assistance? Are you hostage to a salesperson who controls the big account and may walk if they don’t like the new buyer? Are you hostage to a irreplaceable production manager (or any other person)? There’s lots you can do about it but the first step is to realize it has happened.
Top accounts: if they represent a high percentage of sales, then your selling price could drop significantly. While it’s not unusual for top account to be up to 10% of sales and the top 25 up to 50%; to find a top account at 40% of sales is a problem as it is for the top 25 to be 85% of sales (ran into both these situations in the last month). Result is that the price will come down to compensate the buyer for the risk, if they make an offer at all. Management needs to do work now on broadening the customer base to help offset it. Not impossible but takes some work.
FIGMO or Retired In Place: you can’t coast. You have to run the business until you don’t. Business should be growing and personnel issues that need to be addressed should be addressed regardless if the people are related to you.
Anyway, these are a few of the threats to your business that come to mind. Want us to do a threat analysis of your business? Be glad to do so. Some smaller businesses can be done without an onsite visit but that depends. Anyway, message me at tom@cprint.com and let’s chat.
Want to Have an Analysis of Business Sales Threats Done on Your Business?
Yes, we can help even small businesses with three-four workers. We’re especially useful with companies from five to fifteen and even more employees.
For instance, does the son/daughter or employee have the knowledge to “run” and “grow” the business? Is the business organized around functions, not people, so it can succeed beyond you?
This is particularly important for often an “internal” transition requires the seller to finance all or part of the sale. So, you need to assure that you will get paid in your golden years and not have to come back and run the business. The way to do that is to assure your successor is trained. Our program has helps prepare successors.
If you’d like more information on how our program could help you, please message me at tom@cprint.com
Happy Trails,
Tom Crouser
(304) 541-3714
email tom@cprint.com
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