Should I Sell Now or Rejuvenate my Business so it is Saleable?

Many people ask us whether this might be a good time to sell their company. Has the economy stabilized enough to make it worth their while? The short answer is, now is as good a time as any. But the question you really should be asking has nothing to do with what is happening in the economy. The right question should be “Is your company in saleable condition?” It is definitly the right time to rejuvenate and strengthen profitability so that in a year or two, your company is worth buying. And in the meantime, you will be rewarding the current investors… you!

So if you have been cutting costs and waiting in your comfort zone until buying cycles pick up, in hopes that you can survive till then, you have been playing the wrong game. Waiting is the least powerful thing you could do right now. If you really want to be in saleable condition, you need to get up out of that chair and learn how to add more tools to your bag of tricks beyond cutting expenses and paring back staff. Here are the three most powerful things you can do to improve your return on investment that will also help you start down the path of being a company and investor would actually want to buy:

1. Get Back to Basics: GIVE VALUE. Focus on standing in the shoes of your customer. What do they need that would improve the value they receive from your company and what would remove the hassles of doing business with you. Now is the time to innovate your product by building better service around it, helping solve the right problem for your customer. Get out in the field and start learning what frustrates them and then find a way to relieve that frustration. Give back. Be generous. Your efforts will be rewarded.

2. Think Bigger: NOT SMALLER. Build up your gross margin. Think of rounding up prices and mark ups. Do not give volume discounts, solve problems for customers instead. You will never make back a price discount with volume.

3. Forge Partnerships: JOINT VENTURE. You need to get to a broader market. Where can you add value to another company’s product or service? Team up.  Bundle up. You sell their product to your channel, they sell yours to their channel. Now you both have a broader distribution channel. Keep each other warm this winter and it will pay off in spades come spring.

And while you are doing all that, start learning a lot more about what it takes to become saleable. It’s a lot more work than you think. Start by taking this quick quiz from the Globe & Mail It’s your time to get ahead of all the other business owners who prefer their comfort zone over the fast lane.

Smart Succession with an MBO

Do you have a family-owned business and wonder how and who to sell it to? Yes, you should sell it, even if your successor is a relative. Gifting a business is the surest way to erode company value, lose brand leadership (and then pricing power), alienate your loyal employees. This article in the Globe and Mail  details the right way to go about the process of selling to a family member or even a manager in your business.

You will also want to read Tom Deans book, Every Family’s Business

How to Rebuild Your Company Brand

How to regain pricing power when customer loyalty starts to slip or competitors are gaining more of your market share. Lorraine Rieger McGregor was invited to write an article for Business Review Canada’s blog for the July edition on this very topic. Read it here.

Lorraine McGregor Interviewed by Business Review Canada on Merger Integration

In the July 2010 edition of online innovator Business Review Canada, Lorraine Rieger McGregor provides insights into ways to keep the value of an acquisition through the integration.

Will you be able to sell your company?

Will the Great Boomer Business Retirement Migration Actually Happen?

“We’re ready to sell. You know, we’ve kind of done all we can and we’re tired. It’s time for some new blood. So my partner and I want $5 million out of the business. So what are our chances?”

We listened to Trevor a proud and accomplished silver haired 59 year old , the owner of a 15 million dollar industrial company and wondered whether he and his 58 year old partner, Paul realized what getting that exit buyout would require on their part.

“There is only one way you are going to find a buyer willing to invest that much in your business. It’s called Exit Planning and it may take 2-4 years to complete before you’re ready to sell.” I looked over
at my consulting partners as we watched Paul and Trevor’s faces fall. We had seen this reaction many times before.

There is nothing more painful than seeing successful business owners suddenly realize their retirement dreams might remain only a fantasy.

With every phase of life, the baby boomers have had a profound influence on the movement of money across most aspects of our economy. But in their next phase of development will their luck with creating wealth run
out?

The numbers suggesting this is indeed possible are staggering.

By 2011, the first of 70 million boomers are going to turn 65 years old. There are more than 26 million businesses in North America, and 50 percent are owned by boomers, according to the Small Business Administration. And 7 out of 10 of these owners will want to sell their business over the next 10 years, according to the Association for Mergers and Acquisitions Advisors.

That represents $10 trillion in retirement value and 75 percent of that $10 trillion may not be realized according to Richard Jackim in his book “The Ten Trillion Opportunity – Designing Successful Exit Strategies for Middle Market Business Owners”.

Industry Canada and the US Small Business Administration are very concerned that boomer business owners are not paying attention to these statistics and secondly do not have a good understanding of what it takes to sell a business. They have alerted city economic development groups across the country like the City of Nanaimo, BC and the city of Chicago, IL who are now trying to come up with ways to alert owners and help them to get ready.

They are planning for the future to ensure their communities stay economically buoyant according to Jason Boyce in an article entitled “Get Ready for the Big One: Succession Facilitation & the Coming Demographic Wave of Change” published in Making Waves Magazine.

Spirit West Management advises owners what must be done to 
set their house in order.

“It’s much more than succession planning,”
says Lorraine Rieger McGregor, CEO and partner in Spirit West
Management. “It involves reorganizing the company so that an investor
 sees the value. That sounds easy but really what is involved is to stand
 in the shoes of a buyer and ask yourself, would I buy this company? Can 
I easily see that it will continue to grow if the owner leaves so that I
will benefit as the investor? Succession planning is all about how you
 will retire. Exit planning is all about how the business will continue to be successful after the owners leave, which is all important to buyers.”

Rieger McGregor of Spirit West offers these five tips for business
owners who are starting to think about finding a buyer in the coming
 years. First Tip? Start NOW.

1. Change Your Mind Set
Let go of your business now, emotionally. It’s not a reflection of who 
you are; it is an asset that has investment value. The more you can view 
your business from the eyes of an investor, the easier it will be to
make the transition to improving it so it will be attractive to
investors. This is not to say stop being passionate about your business,
it says let it stand on its own two feet.

2. Think Like a Buyer
If you were to buy this company tomorrow, what clues would tell you that
 it would continue to be a successful company? What would you look for to 
tell you that if you didn’t know anything about the company? Buyers want
 to see past evidence of growth: The plans, the result and the effect on
profits. They want to know the industries your company sells to are hale
and hearty especially in this challenging economy. Are your customers 
loyal, buying more regularly and getting your best solutions? Do you
 have a sales pipeline leading to increased revenue? What tools do you 
use for decision making? All of these things show a buyer you run a 
tight ship.

3. Transfer Knowledge and Power
Who will run the company if you’re not there? Can you disappear for six
weeks right now and be sure the company will still be humming when you
return? If not, you’ve got work to do. You may need a management team or
a CEO. You may need to start training and trusting your own people a lot
more than you do now. When you walk into your operation is the
atmosphere tighter than a drum or congenial, tense or excited? How come?

4. Clean Up the Files
For the next three years you’ve got to show increasing profit margins in
a consistent, steady uphill line. That means you will have to clean out
the personal items in your expense account, know where you are missing
 the mark and losing money and fix the problem and then set goals and 
targets that your team is accountable for. Then look at your agreements 
and contracts and get them reviewed by a lawyer. Do your supply 
agreements restrict geographic territory or activities? Do you have the
best suppliers on your team? Are your shareholder and management 
agreements tight or misunderstood? Get the right kind of help to sort
these problems out.

5. Focus on Growth
When was the last time you expanded your market place, launched a new
product or rethought your solution set to better meet customer needs? Is 
it easy for customers to switch from your product to some other company’s?
If so, you better find out why. Get to know your target market. Are 
you solving their problems in the right way? There is opportunity for a
 profit in every hassle you uncover in their business.

Buyers want to see a healthy pipeline of orders and opportunities for
the future. “This is not meant to tell owners what they’ve built isn’t
good enough.” Says Rieger McGregor. “It’s to let owners know that there
will be a huge number of businesses all wanting to sell in the coming
 years. Investors will have their choice of plum opportunities and will
 reject the rest. They will pick the investments where their risks of
 failure have been reduced. Owners need to know how to make that sense of
certainty obvious and reliable.”

It can take 2-4 years to sort out some of these issues. The time flies 
fast. Don’t be resistant to this effort: There’s a business to run
 and there might not be “know how” or time to try and get these ‘value’ 
improvements done properly and without business disruption. But investing the time gives both you and your employees a bright and prosperous future.

Exit planning and execution is something owners will need help with. You may
 need a consultant familiar with exit planning that can help plan and execute these change. Your accountant can devise the best tax strategies. Your lawyer will iron out the agreements and contracts and your board of
advisors should be challenging your decisions and holding you accountable for implementing plans. Then you know you close to having a saleable business.

If owners want to see their retirement plans realized, the time is now. Over the next few years it will be a buyers market, with many more competitors wanting that big exit payoff too.

And what of Paul and Trevor. They are one year into their reorganization and have found a new passion for their business. They know what they want and unlike their competitors, they are well on their way to becoming the right acquisition target for a buyer.

And they aren’t tired anymore.

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