Selling and Staying Isn’t Easy
For weeks after Ellen Henderson Boughn sold her After Image stock photo agency, she could hardly sharpen a pencil without sending a fax to notify the corporate office in London.
Boughn sold the business and continued working there but was unsure how to behave until she realized that she had to stop thinking like an entrepreneur. Instead, she had to become a member of a team.
“Whether I am personally comfortable about taking a risk doesn’t apply anymore,” said Boughn. “What matters in making a decision is whether this a reasonable business risk, and can I defend it?”
Letting go of a business you have nurtured for years is traumatic for any small-business owner. But selling out and staying on in a management role poses additional challenges.
Boughn sold to a larger, international stock photo agency because she needed an infusion of capital in order to expand. Although she was still in charge, she said her employees weren’t sure how to deal with her anymore. It was also unsettling when salespeople who once courted her now bypassed Boughn to meet with representatives of the new owner.
After a few rough weeks, Boughn said, she finally felt comfortable running--but no longer owning--the business she started on her kitchen table in 1976.
“You have to have a scathing, honest conversation with yourself before making a decision like this,” said Boughn. “You have to know yourself, what you need and what you are willing to give up.”
What Boughn gave up was control over a business that she started after seeing a need. While working as an editor tracking down pictures for a 20-volume set of Jacques Cousteau books, she was surprised to find that there was no stock photo agency on the West Coast. So, she began keeping track of local photographers’ work on index cards stored in an old recipe box. In February, when she sold out to Tony Stone Worldwide, After Image had about 15 employees, 400,000 images on file and sales in excess of $1 million.
Entrepreneurs sell their companies for three major reasons, according to Frode Nordhoy, chairman and chief executive of Strategic Analysis Inc. in Reading, Pa. They are either bored with success and want to move on to new challenges, they want to reduce their personal financial exposure, or they need a capital infusion to dramatically expand the business.
“But most entrepreneurs really don’t know how to sell their businesses themselves,” said Nordhoy. Because selling a small business is such an emotionally wrenching experience, he advises business owners to consider hiring outside professionals to advise them.
Boughn asked her UCLA professor, Jose de la Torre, to represent her in the negotiations with Tony Stone Worldwide. De la Torre, who is director of the Center for International Business Education and Research, said he expects more small-business owners like Boughn to look overseas for suitors in light of the major economic changes taking place in Europe and Latin America.
“The next generation of international expansion is coming from small- and medium-sized businesses who are linking up to share technology and offices,” said De la Torre.
Boughn’s decision to sell was based in part on a marketing survey she commissioned from a group of UCLA graduate students studying management. The survey revealed that the stock photo industry was heading for a major shakeout because too many small companies were competing for business from the same advertising agencies, publishers and others.
To survive and thrive, Boughn decided she needed capital. After scrutinizing her competitors, she approached Tony Stone Worldwide, which has 15 offices and annual sales between $10 million and $15 million.
She knew the company was interested in the U.S. market because in 1988 Stone acquired Click/Chicago and changed the name to TSW/Chicago.
“We’d always thought we’d like to go to the West Coast because it has the greatest sales potential,” said Simon Thornley, president of TSW/Chicago. “We acquired After Image to get into the market and to work with Ellen.”
Thornley said despite Boughn’s initial blizzard of unnecessary faxes, the transition has been surprisingly smooth.
“The good thing about this deal is we can probably learn a lot from Ellen,” said Thornley. “And we feel our two business cultures work very well together.”
Selling? Planning Makes a Big Difference
If you are planning to sell your business in the next year or so, now is the time to sit down with your attorney and accountant to begin plotting strategy. Careful planning, especially tax planning, can make the deal much more attractive for both buyer and seller, according to Ron Weiner, a principal in Weiner Associates, a New York CPA firm.
“Tax considerations can amount to one-third of the value of the deal in some cases,” said Weiner, who specializes in counseling small-business owners.
The best time to complete the sale of your business is at the beginning of the year because the Internal Revenue Service requires you to pay any taxes due by April 15th of the following year. In many cases, this means if you sold your business on Jan. 1, 1990, you could have until April 15, 1991, to pay any tax due.
Session on Exports for Smaller Firms
“Exporting: Passport to Profit,” is the theme of a May 18 conference designed to help small and mid-size companies enter the export market. It is being sponsored by the Greater Los Angeles World Trade Center Assn. and the World Trade Center Institute.
The event will be at the Sheraton Plaza La Reina Hotel, 6101 W. Century Blvd., Los Angeles. The session begins at 7:30 a.m. and wraps up with exhibits and a reception at 4:45 p.m. The registration fee, which includes breakfast and lunch, is $95 before April 30 and $125 after May 1. For information about attending or about participating as an exhibitor, contact the World Trade Center Assn. program department at (213) 495-7070.
Financial Planning Meeting Scheduled
Financial planning for the 1990s will be discussed at the May 1 dinner meeting of the Los Angeles chapter of the National Assn. of Women Business Owners. The session is set for 6 p.m. to 9 p.m. at the GTE building, 2001 Broadway St. in Santa Monica. The fee is $25 for members and $35 for non-members and includes refreshments. For information call (213) 623-9977.
Cal Poly Conference for Entrepreneurs
People under 30 interested in learning how to become entrepreneurs may want to attend a daylong conference on May 5 at California State Polytechnic University, Pomona.
The conference runs from 8 a.m. to 3:30 p.m. in the Student Union, 3801 W. Temple Ave. Speakers will discuss how to raise money, how to market your business, how to figure costs and pricing and how to write a business plan. The session is sponsored by the U.S. Small Business Administration, Pacific Bell Directory and the university. Registration is $20. For information call Marie Teeple at the SBA, (213) 894-4894.
HOW TO SELL OUT, BUT STAY ON * Find out everything you can about the company you plan to sell your business to. Interview its employees, vendors, suppliers, analysts, competitors.
* Hire the best professional advisers you can to plan and negotiate the deal.
* Decide what you need to get out of the deal, besides money.
* Once you’ve sold your business, don’t expect things to remain the same. Realize that under its new owners your company’s culture will be dramatically changed, no matter how similar your business goals are.
