One consultant took on the question recently giving a son some hope he could convince the father to retire. He suggested reasoning with the parent and explaining how important the business was to a number of families. That ain’t my experience. My experience is that the owners of the business can and will do with their property what they want to do with it for as long as they want to do with it. This is America, people. It’s their (his or her) business. Coming from a position of, “I’m ready to take over, move out of the way,” is a losing strategy.
Everyone does things in their best interest. What’s Pop’s next career? What’s his day going to look like? What’s on his bucket list? Once a person desires to do something else more than they desire running their business; they will act. Yes, we take assignments assessing the business and dealing with these issues.
But there’s a more important question left unanswered. Has Junior done everything to make himself ready to take over the business? If Junior doesn’t have the cash to buy the business (they never do), then what is Pop’s guarantee that he’ll get paid (no, I’m not gonna give it to you).
Reminds me of a call I received from a distraught son a buncha years ago. He went on for a long time about how it was time for his parents to move on, ya da. Then it occurred to me. How old are the parents? “Oh,” he said, “around 49.” I learned to ask that question first that day.
Don’t Share Your Valuation with Your Buyer
If you have your business valued, the last thing you want to do is to give the valuation to a potential buyer. Why? Well, it first establishes a price that the buyer will try to reduce.
Establishing a selling price may or may not be something you wish to do (when you list with a broker you usually have to do this but at least there you are doing so with their help).
Second thing it does is to be a target for nit-picking. The buyer will try to point out where the valuation was obviously incorrect and you will be left defending something you probably aren’t comfortable defending. The focus then changes to YOUR valuation of your business.
Better plan is, “What do I want? Dunno. Here are my financials, whatcha gimme?”
Alternative is, “I want $500,000.”
It is up to the buyer to decide the value of your business to them. It’s not up to you to do so for them. All you need to determine is your “walk-away” price or the price at which you’d rather continue running the business than giving it up for that (I’ll walk away from the deal before I’d sell it for less).
What brought this up?
Heard last week from a client where a buyer proposed that they go to a valuator (who the buyer has already “talked to”) and have them “independently” value the business and the buyer/seller would split the fee. Assumption here, of course is, the seller would agree to the calculated valuation. Give away was the line where the seller said he already had talked to the valuator and the valuator agreed that the business wasn’t worth what the seller was asking. Hard to make this up.
Country of Old Owners Ready to Retire?
An article on “The Special Challenges of Retiring From a Business You Own” in the Personal Business section of the New York Times, last Saturday, July 26, 2014 noted: “In a 2007 report, the United States Census Bureau found that a third of small-business owners were 55 years or older…” What’s that mean to us? There will be more, not fewer businesses on the market by the time we will be selling. So, that’s means it’s more important for us to have a better business to sell.
What’s that? Real business organized around functions, not people. Positive cash flow, growing sales and trained workers with products and services that are growing. Does that mean printing is dead? No. It means that printing is changing and we have to keep up.
Building Lease Needed
More than one owner has chosen not to enter into a “long-term” lease because they are considering selling their business. Hum. Problem with that is you’re left selling a business that may be out on the street in thirty days and no lender is going to look favorably on that. Remember, it’s the lender of the money to the person purchasing your business that makes the “golden rules,” not necessarily the purchaser. What to do? Get a one year lease with five options to renew for a year would be a thought. Remember, the bulding lease is really to protect your “right” to occupy the space for the period of time more than it is an “obligation” for you to do so.
Considering transitioning to son/daughter or employee?
Our CPrint program has helped many prepare successors for business over the years. Let us learn more about your situation as you learn about our program in a no-cost or obligation online assessment meeting. Message me at email@example.com if you’d be interested.
Ready to sell or retire?
We provide on-site valuations of businesses that include an estimate of value as well as include recommendations of “fixes” that will improve earnings and thus value if there are issues there. We also can provide a non-onsite arms’ length estimate of value for planning purposes for businesses if not in need of fixes. If you are ready, then email me at firstname.lastname@example.org and let’s see where you are.
If you’d like more information on how our program could help you, please message me at email@example.com