Here’s one tell-tale sign you should sell your company

However, if you’re lucky enough for your company to succeed and flourish, there may come a time when someone else will find enough value in it to buy it – and therefore, be the one to risk the time, effort and money like you have.

But how do you know when it’s time to sell your company? Here’s how it worked out for one New Jersey-based company:

Started back in 2000, PTM Inc. was a reseller of web conferencing. Continuously searching for the right path to take, the owner eventually decided to sell learning management software, and it worked out very well.

Fifteen years later, the company received an acquisition offer from a large private equity company. The owner was unsure of what to do. This company was his pride and joy. He put in the blood, sweat and tears to get his company to where it is today. On the other hand, the offer was quite generous, to say the least.

After giving it plenty of careful thought, the owner of PTM Inc. came to the realization that he was taking fewer risks as of late. As his business grew, he became slightly more conservative because he didn’t want to risk losing what he had built.

Conversely, the potential buyer was willing and ready to take a big chance by integrating PTM Inc. into another one of its acquisitions. The current owner’s penchant for taking chances with his own business was now than that of this potential acquirer. It was at this point that the owner decided to accept the compelling offer.

-To Sell or Not to Sell

Everyone has a different idea of how much money they want or need. It could depend on what kind of lifestyle you grew up accustomed to, or any other reason. Therefore, the scenario of a potential buyer being willing to risk more than you, the current owner, can happen at a different time depending on the current owner’s particular goals.

Whenever that time comes, it’s a sign that your company is in need of a new owner. If you think it might be the right time to sell your company, contact us at Calder Associates. We can help you prepare your business by increasing its value and making it more attractive to potential buyers – so you get the most out of it. Call 215-667-8539 at your convenience.

Though it takes a great deal of perseverance to found and maintain a business, selling one is not so easy. At any given moment, 25% of all U.S businesses are up for grabs. Despite the legacy and accomplishments they leave in their wake, few business owners know what they are worth and often over value their businesses. Because of this, businesses tend to stay up for sale indefinitely.

Here’s the Rub

After a long and storied career as entrepreneurs, most business owners aspire to sell their companies, pay off their debts, and retire comfortably. Much as owners may feel that they deserve this, the valuation of a business is a hard science, based on historical and projected profit performance and value enhancing characteristics of the business. In order to understand what drives value, it behooves a business owner to seek out the services of a firm like Calder Associates.

Resist Stagnation

Long before initiating an exit plan, business owners should be thinking about their sales performance. If they want to entice a premium valuation from buyers, they’ll need to prove their business has the potential to sustain itself and grow. By conceiving of new strategies for sales and marketing, or designing new products and services, businesses can maintain their competitiveness and attract prospective buyers who are prepared to pay a premium for a growing company.

Be Ready and Patient

Sometimes businesses sell when they’re ready to sell; other times there are no options left. Various studies have found that 75% of business owners don’t have a succession. This lack of planning doesn’t enable the business to be adequately prepared for the unexpected, such as disability or loss of a leader. Even when the owner is ready, the entire process of preparing, marketing, and closing a business takes anywhere from 12 to 24 months. In some cases, this process may even extend beyond two years; depending on industry, the state of the market, and size of the company in question.

The Selling Process Itself

The process of selling a manufacturing, distribution or service business between $5m and $50M in sales is complex. The M&A Professionals of Calder Associates are experienced advisors and consultants who get deals done. They have a proprietary M&A Process designed to find the right buyer and the right deal for business owners who want to see their businesses continue to succeed under new ownership. Calder Associates is the best bet for any business owners who want to sell their businesses confidently and confidentially.

When an M&A firm is devoted to selling—not simply listing— businesses, they take the time to assess the likelihood that a business will be saleable. At Calder Associates, we have formulated a process for selecting the businesses we want to work with. After assessing that a business is indeed saleable, we posit two crucial questions to a business owner:

I. Are you realistic about your selling price?
II. Are you truly ready to sell?

If we hear a resounding “YES,” and we believe the market is receptive, we proceed with the signing of an agreement. Nonetheless, as our firm has learned, a business’s viability on the market can always change. Under financial pressures or losses of personnel, desirability is not a certainty.

An Anecdotal Indicator

Our Mergers and Acquisitions firm is working with a 75-year-old business owner focused on retirement. Since signing an agreement with this client, his business has had a 25% drop in sales. Accordingly, the offers from buyers have been lower than what had originally been agreed to; frustrating the owner. He argues that the value of his business is in the business that he has built over 30 years; not the way it’s currently performing. We sum this up as: our client wants to be paid for his efforts.

All businesses, regardless of the industry, are valued according to their EBITDA or “earnings before interest, tax, depreciation, and amortization.” The more financially successful a business is, the higher its valuation. Despite how venerable it may be, a business’s legacy has no bearing on its valuation if the business performance is declining. In the case of our client, he requires at least a 25% increase in sales and a 50% increase in EBITDA to obtain the selling price he envisions.

Take the Deal!

Unless they’re prepared to maintain and market their businesses for years, owners have to make a decision. Dismissing a buying offer, during a period of underperformance, can have disastrous consequences if there is no plan to turnaround performance. For an owner that is burnt out and not able or willing to commit to growing the business, accepting a deal that’s 20% below expectations can be the best deal that they can get. Rather than risk further decline in performance and value, an owner can still retire comfortably, while retaining loyal employees, and providing ongoing service to long-term customers.

At Calder Associates, we can confidently say that 99% of clients regret passing up on such a deal because in retrospect it was the best deal that they could get. The best advice that we can give is when a business owner is ready to sell, be realistic about selling price