Looking at Best Time to Sell Firm
Executive Roundtable is a weekly column by TEC Worldwide, an international organization of more than 7,000 business owners, company presidents and chief executives. TEC members meet in small peer groups to share their business experiences and help one another solve problems in a round-table session. The following question and answer is a summary of a discussion at a recent TEC meeting in Southern California.
Question: I own a small manufacturing company and have been running it my entire adult life. The business is doing well, but I just don’t have the passion for it that I used to. In fact, I frequently dread coming to the office in the morning, when it used to be so much fun.
I constantly think about selling out, but I wouldn’t know what to do with myself after the business is gone. This is all I have ever done.
Should I sell now, or should I wait and see if this is just a phase I’m going through?
Answer: Running a business is hard enough when you enjoy doing it. Take away the passion and the fun and it can quickly become unbearable drudgery. Before dropping your business, however, you would be well-served to take a long, hard look at the issues involved.
Getting top dollar for your most important asset requires analyzing a host of economic factors such as market conditions, acquisition trends, the health of your business and the availability of potential buyers.
Do these indicators point to a bull market for sellers in your industry, or would you get a better return on your investment by waiting for more favorable market conditions?
You also need to consider your current financial situation and your long-term financial goals.
If you sell now, will you take enough money off the table (after taxes) to fund your current and future financial needs? If not, what does the business have to be worth to enable you to achieve financial independence, and what do you need to do to get the business to that point?
The answers to these questions will play a major role in determining when and how to sell a business.
Equally important, says Seth Krugliak, chief executive of Five Guys Named Moe in North Hollywood, is the issue of how you intend to spend your time after you leave the business.
“The worst thing you could do is sell your company without knowing what you want to do,” Krugliak said.
“For the first time in 30 years, you’ll have all the time in the world on your hands with no purpose or aim in life. Before making any major decisions about the business, you need to figure out a way to rekindle the spark in you and find something else--whether that involves another business, recreation, philanthropy or whatever--that will allow you to have a fulfilling second part of your life.”
Charting a course for the rest of your life, however, is no easy task. Phyllis Murphy, CEO of Burbank-based P. Murphy & Associates, suggests sticking your toes in the water before diving headfirst into the unknown.
“Start out slowly,” she said. “Find a way to rearrange your schedule and/or delegate some of your responsibilities so that you can work five days a week instead of six. This will allow you to see how you handle an extra day of recreation. More important, it will give you time to look around for something new that might reignite your passion.”
Arnold Zane, president of the Energy Club in Pacoima, echoes the need to develop new interests. But he recommends a lengthier period of exploration.
“Assuming you have a competent management team in place, why not take an extended hiatus of several weeks or even a few months?” he said.
“That would allow you to determine whether you truly enjoy having a lot of free time or just think you want it. On the other hand, you might discover you still love what you’re doing but just need a change of pace. If so, you could bring someone on board to take over the day-to-day operations of the company, which would free you up to do what you enjoy most.”
Ted Alred, president of Ontic Engineering and Manufacturing in Chatsworth, favors a more radical approach.
“I say let go of the business first and then figure out what you want to do,” he said. “As long as you remain in the driver’s seat, any decision you make will come out of a business owner’s mind-set. Consequently, you won’t be totally free and open to new ideas as you begin to explore possibilities for your life beyond the business.”
*
If there is a business issue you would like addressed in this column, contact TEC at (800) 274-2367, Ext. 3177. To learn more about TEC, visit www.teconline.com.
