Every business owner sells their business at some point. The big question is, to whom are you going to sell your business?
Other questions include, will you sell your business to an equity fund? Will you sell your business to a competitor? Will you sell your business to a family member? Will you sell your business to yourself?
Or, will you just turn off the lights one day?
The last option took me by surprise when I first heard of the idea. “Why would anybody just walk away?” I asked the friend who mentioned it. He gave me two reasons why someone would just turn out the lights.
Reason No. 1 is that the business owner made all of money he could ever spend, woke up, and decided to quit. Reason No. 2 is a little more obvious. These business owners went broke and decided to call it quits. None of you will make that mistake because you have chosen to succeed in your business by reading this article.
I’ve been a business coach with Nexstar Network going on 14 years now. I’ve had the honor as a Nexstar business coach to coach more than 10 companies that have taken their business from losing money when I first started working with them to selling their businesses for more than they ever dreamed possible. I love coaching people who want to succeed.
Understand this important fact: I had the easy job as the coach. I didn’t have to implement any of the changes these companies needed to make in order to succeed. Every one of the successful owners got the same coaching message I give to all the contractors I coach. The difference was these owners needed to change, wanted to change, or just plain had to change, so they wouldn’t end up as the contractor who had to turn out the lights.
The most important ingredient in selling your business? Your business needs to be profitable. No one wants a buy a business that sucks. A business that doesn’t make money sucks the life, the cash and the will right out of the owner and employees. Don’t be that guy or gal.
I’ll give you a couple real-life case studies.
When I first met the owner of Company A, we reviewed his financial statements together. The company owed nearly $1 million and hadn’t made a profit in three years. The company was producing about $3 million in revenue, so the owner basically owed one-third of the prior year’s revenue to his vendors and bank.
I loved working with this gentleman from day one. His back was against the wall and he had no way out except to take Nexstar’s best practices and plug them into his business. Over the next five years, this company focused on the daily goal, day after day after day, and the owner never took his eye off the goal.
This focus infiltrated every employee that worked there. The plan laid out was simple, but simple doesn’t mean easy. It was hard work to change the entire company’s way of doing business, which had been the same for the last 10 years.
In one day, this owner turned on a dime and began running his business the right way. It amazes me still today. But his focus and change came with pain — the pain of losing long-time employees who weren’t willing to change. The pain of making the changes or going broke. The pain to the owner’s ego by admitting he didn’t know it all. The pain from admitting he had let his family down. The pain from identifying a segment of business sales he enjoyed doing but was no longer going to focus on. It was painful throwing out all the old ways of doing business. But, it was not as painful as it would have been if he kept the old ways in place.
The team changed the way they answer the phone and identified the types of customers they were now going to serve. They started training people with no prior training to become the best service technicians and sales people in the country. Not only did this company shift 180 degrees with the field employees, but the office support staff went from not having a designated person answering the phones to being a world-class call center.
One of the biggest changes I noticed was that the owner transitioned into one of today’s most successful businessmen in the country.
He took a leap of faith; however, as his coach, I saw this transition was his only way to become profitable. It was truly a leap of faith because he hadn’t been there and done that, but he knew if he continued his old ways his business would not survive. He was banking on faith at this point. Faith that the Nexstar processes would save his business. All he needed to do now was to plug them into his business.
And that’s exactly what he did. The company is still around today, although my friend has moved on — but only after being rewarded with a cashier’s check large enough for any us to retire on. You see, he built a business that was attracting buyers. Buyers want a profitable business, not a hope and prayer. Selling this business worked out great for both parties. Plus, a few years later, Nexstar was able to capture this owner as a new business coach who has “been there and done that.”
Here’s another example that is very familiar in our industry. The owner is a next-generation contractor. Many of you reading this can probably relate. He joined the family business, Company B. After a few years working with his family, working for 25% of ownership didn’t sound as good a working for 100% ownership. So, he went out and started his own plumbing service company.
A few years went by and he attended a Frank J. Blau Business of Contracting seminar. I happened to be at the same seminar in Wichita, Kan. I went all in with every word that came out of Frank Blau’s teachings that day. This other contractor took a different approach. He let it go in one ear and out the other. Bummer for him.
Now, fast forward 13 years, and that same contractor called me saying, “Hey Jim, I’m losing money and I’m either going to lose my business or I’m going to need some help. Can you help me?”
I’ve always enjoyed our friendship in the past — it was like we were brothers. I was excited to dust off the old processes and help my friend out.
A little background on me: I sold my business in 2001, and I sucked at retirement. So, helping this friend gave me something exciting to do. The next day, I went into his business and lo and behold, he was right. They were bleeding to death. Not only that, the business employed most of his kids. I spent a year working closely with the business and family until they were making money consistently.
I ended up joining Nexstar as a business coach three months later. Company B joined Nexstar and I was assigned to be their business coach. I’ve never seen a closer, happier, have-your-back type family as the group working at this company. These folks ate up the Nexstar processes. They implemented the exact same processes as Company A. As a matter of fact, both these owners are now the best of friends.
The owner of Company B recently sold his business as well. All members of the family are still working there, but now they have their retirement checks in the bankand they’re working for fun when they aren’t out deer hunting, water skiing, babysitting, pheasant hunting or running a large charity called Giving the Basics.
The bottom line is that you’re going to sell your business. It’s up to you to make sure you are ready to capitalize and retire the way you always dreamed.
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