BY STEVEN PAPPAS, PARTNER, M&A MI M&A ADVISOR
Let me start by saying that I don’t have a crystal ball. The word on the street is that tough times are coming, and the glory days of a fat market will indeed come to an end. Of course, the pundits have been telling us that for a while so what’s a business owner to do? Sit, grow, sell, buy more? At some point, every business owner wants to transition out, and in fact, everyone must since we can’t live forever.
The magic is doing it at the right time. Part of that is just luck – we’ve all heard of companies getting above a top dollar for their company only to have a bubble burst on the new owner a couple of years later.
Here’s the rub. Now is prime selling time for many industries – especially here in the Northeast. Multiples are at almost record levels; interest rates are very low, and businesses are growing. Savvy buyers are in stealth waiting mode: they want the downturn so they can capitalize on someone else’s misfortune. It’s not a bad thing, it’s just business.
“If you are a Boomer business owner, the procrastination needs to stop. You never truly know what is going to drive your decision to sell and being prepared is not only smart business, it will reduce your stress level immensely.”
Now let’s talk about the famed Baby Boomers. The exodus of people ages 55-72 has begun and will only escalate over the next decade. Adding another dimension to this process is the mindset of many Boomers – Do I work until I can’t? Do I sell now? What should I do? Many in the boomer age bracket haven’t planned and retirement snuck upon them… then something happens which puts them in “I need to sell NOW” crisis mode.
Most family-owned businesses will change hands over the next 5 years. Reasons leading the pack are retirement, health, and burnout. Their children aren’t following in mom & dad’s footsteps, leaving many of these family-owned businesses being acquired or merged.
It indeed is the calm before the storm – the Perfect Storm.
If you are a Boomer business owner, the procrastination needs to stop. You never truly know what is going to drive your decision to sell and being prepared is not only smart business, it will reduce your stress level immensely. A Happy Boss often equals a Profitable Company.
Here is my simple 5-Step strategy to move you away from the storm and into calmer seas:
1. Hire an M&A advisor. Yes, this sounds like a sales pitch, but it isn’t. I hire people to fill voids of talent I do not have – accountants, wealth managers, and legal advice. So, an advisor can fill the voids in a transition, advising you in many areas of the process you would not have familiarity with such as business valuation including strategic/synergistic premiums; maximizing your sales price through buyer competition; and last but not definitely not least, how to keep your sale confidential during the process.
2. SWOT it. Take a deep look in the proverbial mirror – what are your:
This will help determine the outcome of your exit. Are there changes you can make now that will increase your business value? Your M& An advisor can help you answer those questions honestly and thoroughly.
3. Start to clean up your house now. From staffing to sales, to marketing, to culture. If you want top dollar for your business, you need to have it staged in a way that’s appealing to the best buyers. This is another area where advisor expertise can help.
4. Personal life goals. It’s so important that you are clear about what you want your life to look like once the transition of power and ownership happens. You need to have a plan for what’s next!
5. Mindset and flexibility. Finally, understand that this will be a very emotional transaction. Listen to the experts and take small steps to optimize the process and your outcome will be far better than most.
As far as the economy? It’s cyclical – so don’t wait and be pro-active. Then you can be ready to listen to the cues and act for maximized results!
STEVEN PAPPAS, PARTNER, M&A MI M&A ADVISOR
DIRECT LINE: 860.669.2246