By Scott Bushkie | Guest Column
When a business owner says it’s time to sell, I ask, “What’s your time frame? When do you want to be out?” The answer I hear most is “yesterday.”
That is a problem. Most business owners underestimate the time it takes to sell and exit their business. It’s not like selling a house. You don’t get to hand over the keys and walk away on closing day. It’s such a common misconception that we’ve framed and hung this piece of advice in our conference room: “Selling a business is a process, not an event.”
In an ideal world, you’d be working with an advisor for two to three years before you put your business on the market. There are financial management changes (e.g. working capital, audits) you can make to maximize your sale value, plus other pre-transition activities that will better position your company for sale.
Once we list the business, it takes about nine to 12 months, on average, to sell a lower middle market company. After that, sellers can expect a six-month to one-year transition, or longer, depending on the buyer and their needs.
Everything’s negotiable, of course. Some sellers want to head for Florida as soon as possible. Others want to sell, but they aren’t quite ready to go cold turkey. It’s possible to sell and then collect a salary and benefits for a few years, minus all the stress of ownership. In fact, for the last two businesses I closed, the sellers were opposites when it came to their transition goals.
One seller knew his company was on a good growth trend, but he was burned out as an owner and needed help to get the business to the next level. He signed a three-year employment contract as part of the sale, earning a larger salary than he had been taking as an owner, plus lucrative bonus options if he helps get the company where he thinks it can go.
My other seller was ready to retire at age 60 and was itching to travel the country with his wife. We negotiated a 60-day transition period in that deal, but the seller must have talked his way into early freedom because he sent me a postcard from Alaska two weeks after closing.
As for me, I know I won’t be running Cornerstone when I’m 80. I want to go out and have fun with my wife and kids while I’m still fit and healthy. Figure out who you are and what you want and then work the numbers backward. Start talking with your advisors now, so when you’re ready, you’re ready.
Don’t make the mistake that many sellers make and wait too long. Be proactive and go out on top. Because no matter how hard I try, I can’t deliver on “yesterday.” •
Scott Bushkie is principal of Cornerstone Business Services, an M&A advisory firm with offices in Wisconsin and Iowa. He can be reached at (920) 436-9890 or email@example.com.