Earlier today I received a phone call from a previous acquaintance that I had met several years ago, he asked, “Bruce, is now a good time to sell my business?” My answer was, “that depends;” if you are in the alternative energy business and have 300% EBITDA growth, “yes, it’s a perfect time to sell.” Unfortunately my friend was in a real estate related business and it’s the fall of 2007.
Back in 1999, I approached a friend of mine in the printing industry and suggested he sell during what was the “hottest” Market I had ever experienced. He said, “I know I should sell, but everything is looking so good and we are making so much money, I just can’t stop now.” That same friend called me in 2002 and said he was ready to sell now. I had to explain to him that I would have a hard time getting him 25 cents on the dollar for his asset value, let-a-lone a 6 or 7 multiple of EBIT. His company is no longer around.
John F. Kennedy once said, and I paraphrase, “repair your roof while the sun is shining.” This made me start to think about what types of businesses are being sold for a good premium and should take advantage of the “sun shining”.
If you are in the business of short run, bulky fabricating or manufacturing and have a shipping cost advantage or a quick turnaround advantage over your overseas competition, now is a good time to sell
If you have the best Sales Force in your industry, but an average product offering, now may be a good time to sell.
If you have built a solid infrastructure, but do not have the capital to expand by yourself, now would be a good time to sell.
If you are out-performing your competitors and want to continue to grow but do not want to take all the risk yourself, now would be a good time to sell 80-90% of your business.
If you have strong worldwide competition and could “front-end” a competitor, now would be a good time to sell.
If you are in a business that is losing ground to the Global Market and are still performing reasonably well, now would be a good time to sell.
If you have unique products that have some type of Market penetration and/or momentum, now is a good time to sell.
I could probably go on and on with profiles of good salable opportunities, but my point is to take a few minutes and look at the economics of your company today vs. tomorrow.If you decide that it is time to move forward with a sale, take a good look at your current situation and answer these questions:
- Have I prepared my Business Succession Plan?
- Have I updated my Personal Estate plan?
- Are my Professional Advisors (Attorney, CPA , CFA or Banker) aware of my plans and have I solicited their input?
- Have I sat down with a reputable Investment Banker, Business Broker or Valuation Specialist and confidentially reviewed the value of my business?
- Have I discussed my plans with family members or Key employees who may be affected by my decision to sell?
The above are just some of questions a good Investment Banker/Broker will take you through. Just remember, only you can ultimately decide if “now is a good time to sell”.