by Scott Bushkie, CBI, M&AMI
When a business owner says it’s time to sell, one of the first questions I ask is, “What’s your timeframe? When do you want to be out?” And the answer I hear most often 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, and you don’t get to hand over the keys and walk away on closing day.
It’s such a common misconception, that we’ve actually framed and hung this piece of advice in our conference room: “Selling a business is a process, not an event.”
In an absolute ideal world, you’d be working with an advisor for two to three years before you even put your business on the market. There are some bookkeeping changes 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, many sellers can expect a six-month to one-year transition.
Everything’s negotiable, of course. Some sellers want to head for Florida as soon as humanly possible. Others want to sell, but they aren’t quite ready to go cold turkey on the whole work thing. 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 polar 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 get out and 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 some early freedom because he sent me a postcard from Alaska just 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 backwards. Start talking with your advisors now, so when you’re ready, you’re ready.
Because no matter how hard I try, I can’t deliver on “yesterday.”