Early in his career, Greg Kells, president of Sunbelt Business Brokers Canada, made a mistake that taught him an invaluable lesson about knowing when to sell a business.
He was working with the owner of a small children’s clothing shop who was on the cusp of retirement.
“I found her a great buyer and a really good deal and at the closing table she’s crying and asking me if it’s possible to hang onto the business for a couple more years,” says Kells. He knew the offer was a good one, and the buyers could have done really well with the business. “But I foolishly said to her, well, yeah you could hold it for a few more years and we could try to sell it again, but you know there are risks.”
Predictably, the current owner decided to stick around.
“She slipped on the ice that winter, broke her shoulder and her arm – the end result was the business deteriorated over those two years,” he says. “I did sell it eventually for half of what she was offered the first time, and to buyers nowhere near as capable. It was a disaster from my perspective.”
He’s carried that lesson with him over the decade and a half he’s been selling businesses. He’s seen the gamut – from selling tiny shops to brokering deals with $50 million private companies being targeted by public corporations.
“The issues we deal with are the same regardless of industry or size,” says Kells. “Simply put, most business owners wait too long.”
He walked The DealRoom through some of the key indicators that it might be time to sell a business.
If it gets to the point where you just don’t enjoy it anymore or don’t find it as challenging as it used to be, you might want to look into finding someone to take the reins.
“What those kinds of personal things are telling you is you probably should have sold it two years earlier,” he says. “The average business owner doesn’t retire at 55 or 65, in fact the average is 71.”
At that point health concerns can zap to the life out of any leader, endangering the success of the business. Stick around too long and you could devalue what you’ve spent years building.
Times are changing
“I’m selling a business this month where a guy ran a manufacturing operation and ran it well – he’s been pretty efficient but in terms of marketing, he never understood it,” says Kells. Unfortunately, his failure to adapt and evolve to the digital marketing landscape has put him behind the competition.
“When the owner doesn’t keep up with changing technology, it can have a pretty nasty effect on the business,” he adds.
Fail to adapt your skills to the constantly evolving industry and once again you run the risk of devaluing what you’ve built.
“Sometimes the owner doesn’t see how a business will improve by bringing in young blood,” says Kells. “You need an outside third party to point out to you the opportunities you’re missing.”
Get a check-up
He recommends bringing in a business broker or consultant, a bit of a check-up, so to speak, for the business just to see where it’s headed and where it could be headed.
“Ideally, you want to get a business to a level where it operates without an owners involvement, where you’ve maximized the bottom line and built employee retention programs,” he says. “When you get it to the point where it’s performing well and you can take it to market – that’s the smart way to do it.”
Even if you’re unsure whether or not you are ready to sell, Kells recommends seeking outside advice because once you do decide to pass the buck, it can take anywhere from three months to several years to find a buyer.
“Most business owners wait to long to sell, if they would sit down with a business broker now and look at the issues and how long it’s going to take to maximize the value drivers they could plan it out,” he says. “For 90 per cent of them, by the time they come to us saying they just want out – it’s too late.”