Who Will Buy Your Business?

The Business Owner

“Nobody is going to buy your business” is a statement that can deflate an owner just as sure as a pin to a balloon will send it spinning around the room.

George’s CPA referred him to me as he was interested in selling the business he had started a decade earlier. We had a thorough discussion about the business and I reviewed five years’ of the company’s financial statements and tax returns. It was at this point that I made the above statement.

The company’s sales and profits had been on a rollercoaster ride. Six-figure losses one year and six-figure profits the next although never enough to recoup the prior year’s loss. The net was that there was a large negative retained earnings, accounts payables in excess of cash and accounts receivables plus substantial bank debt.

Treat Your Business as a Business

You see, George had an outside interest and when business was good he got very involved with this other interest until the business became bad and he was forced to return to managing the company. The wide swings in revenues and profits were because George was the primary salesperson for the company so when he wasn’t working hard sales declined. In other words, the business had a huge dependency and it was George.

This wasn’t the only problem with the business. George had hired his romantic interest, paying her an executive salary for doing administrative work and running errands. There was no business plan, no marketing plan, and no budgeting. Actually, there was no planning of any kind; everything was done on the fly. It didn’t take very long to figure out that we needed to do some planning, budgeting, and monitoring.

It Pays to Plan Your Escape

Our first meeting was about July 1, a very, very slow time for George’s industry. Within a few weeks, we had a sales and marketing strategy outlined and in place. I insisted they monitor every activity related to sales whether it be marketing letters, telephone calls, in-person sales calls, proposals, etc. For the six weeks until Labor Day, the company turned into a marketing machine (instead of just coasting through the summer as they usually did). Their last six months of that year ended with sales 33% above their forecast and that momentum continued into the next year.

By the next summer, George was entertaining interest from two industry buyers and one outside buyer. He received an offer, which he turned down. Now that there were some systems in place, momentum, and consistent profits he decided he didn’t “have to” sell and would continue to operate and grow the business, making small improvements along the way. Five years later he sold to a competitor for substantially more than the offers years prior. In fact, the downpayment was significantly higher than the price in the original offer he received.

You see, George had an outside interest and when business was good he got very involved with this other interest until the business became bad and he was forced to return to managing the company. The wide swings in revenues and profits were because George was the primary salesperson for the company so when he wasn’t working hard sales declined. In other words, the business had a huge dependency and it was George.

This wasn’t the only problem with the business. George had hired his romantic interest, paying her an executive salary for doing administrative work and running errands. There was no business plan, no marketing plan, and no budgeting. Actually, there was no planning of any kind; everything was done on the fly. It didn’t take very long to figure out that we needed to do some planning, budgeting, and monitoring.