A big lesson from a 3-time business owner: selling a business in uncertainty
“Business Sucks”, is what a client told me in early 2008. I was perplexed since the general economy then was still good. But the client served the restaurant and banking industries and they started feeling the 2007-09 recession early. At that moment, I did not know it, but I would be selling my business a few months later.
At that time I had two businesses, my consulting practice serving CEOs and my golf business (I was a part owner). I took this client’s response to heart. It was a short time later that I decided to sell my investment in the golf business. While complicated, we ultimately got it done. There was a catch, the buyer wanted to close in October 2008, I wanted to close before Summer. We closed in July 2008 – providing I take a 20% haircut on the price. I had no idea the financial crash was coming (like most of us then) but I wanted to spend the summer NOT worrying about the closing. Had I waited, I would have gotten crushed (as did the investors in that business). Dumb luck?, maybe. But maybe my gut was secretly telling me something.
What I did know is that the golf company was growing and in the process of raising a $30 million round. The value of my initial investment had grown 300%. I was mostly annoyed with the senior leaders, so by selling, I was getting rid of a headache and taking some cash off the table.
I am no genius, my first business was a failure. My second (the golf business), was a great escape. My third, the consulting practice, was good enough, but my business partner and I had grown estranged. (Partnerships are like organic beings by the way – they have a birth, a life and a death. – if you were/are in one – you know what I mean).
I have had a number of conversations with business owners recently, so I understand how not selling your business in uncertainty might make sense.
Here is my big lesson for business owners: each time I left a business, I asked myself, “what are the upsides and downsides of staying or going?”
Today the market is fluid, buyers and sellers are unsure about pricing, yet the only numbers that matter are the last 2 to 3 years, because 2020 is an unknown.
In 2021, the market will be known, but your 2017, 2018 and 2019 results may no longer matter, your 2021 and 2020 results will be the sole criteria. That means to get rid of those likely weaker numbers, you would need to wait 6 to 8 years (at least) to show 3 years of growing revenues and profits.
Here is an exercise I encourage all business owners to periodically run:
Some Upsides of staying in your business:
- Maintain an income
- Do something I like
- Maintain employment for my people
Some Downsides of Staying:
- Will customers pay me on time, or stiff me?
- Will I, or my spouse, or my workers get sick?
- Will I miss out on the high price for my business for years to come?
Some Upsides of leaving (selling):
- A nice cash payout for my business
- No more headaches with staff and customers
- Stay safe, by not being in and around people’s homes/businesses
Some Downsides of leaving (selling):
- Can I replace income from my investments or another way of making a living?
- Will I miss my co-workers, clients and industry friends?
- What will I do with my time that will still give me a sense of purpose?
Deeper thinking is worth the effort – It was for me, time and again.
There is a lot to think about when you are considering what to do with your business. One way is to ask yourself the questions above, another is to try my What’s Next? Self-Assessment, a quick way to find some organized self-reflection. In light of the COVID-19 crisis, I an offering this at the unheard of price of only $59 (saving 80%), with this coupon code: 0dmm6o5 Click Here to get started.
PS Stay safe. Wear a mask when outside. Wash your hands – use soap.