Big Red Car here. Gorgeous day in the ATX. Come on down, ya’ll.
So The Boss is talking with a couple of his brilliant CEOs and they ask — when do we know it’s time to sell, Boss? What are the signs, Boss?
The Boss has been a buyer and seller of stuff his entire business career. At times it has been the essential skill and driver of the business. Sometimes it has been the soul of the business. So what’s the answer?
It is always the time to be ready to sell. But, Boss, I was born ready. What are the signs?
As The Boss likes to say — Timing is everything!
Here are some obvious signs:
1. When you see movement in your industry — other deals — know the entire industry is in play. When there is no activity, you should be getting ready. It will change and it will change fast.
2. When you see any kind of consolidation — horizontal, vertical (operating units, distribution, manufacturing).
3. When you see a lot of senior personnel changes among industry players. When knowledgeable people move, they may lust for the operation they left and want to buy it.
4. When there is a lot of activity — events sponsored by financiers. Folks are talking shop.
5. When there are changes in the regulatory environment such as the JOBS Act (though the SEC has managed to make the JOBS Act a neutered house cat, no?).
6. When there is new company formation challenging the status quo. Folks like to sell companies to avoid competition or the re-shuffling of the market.
7. When the age of owners is consistent with the decision to retire and there is no clear succession plan.
8. When owners confront a significant emotional event — death, disease, disability, divorce, distraction or distress.
9. When new brands — often foreign brands — enter the industry requiring a shuffling of the deck chairs.
These things will be subtle and often come packaged together. Have your antennae out and adjust the signal.
Preparing to sell
A prudent business knows there are three things that happen every day — hold, sell, buy. Perhaps not as dramatic as that because you are building for the future so you aren’t making a discrete decision like a stockbroker. Nonetheless, you are doing just that.
Here are some specific things you should be doing:
1. Networking like mad to meet, understand and develop relationships with potential buyers (or sellers). Know the players in your industry intimately. Develop close personal relationships by exchanging non-essential but private information. Don’t trade the beans to a guy named Jack but know the players BEFORE you need to know the players. Go see them, my friend. Go meet them.
You: “Hey, Jack, I’m going to be in your town in two weeks. Let’s get a coffee and chat. What do you say, Jack?”
Jack: “Hey, that’s a great idea. Let’s have lunch and talk shop. I’ll give you a first rate tour of my joint.”
Now you’re networking. Why? Because America does business with its friends, so the first thing you have to do is make friends. Hell, you KNEW that, right?
2. Prepare the basic information on your company to be able to tell the story of its history and short term performance.
You need a short PPT on history and operations. You need pictures. Seduce the buyer with interest.
You need a graphical representation of the numbers over the last 3-5 years. Revenue, expenses, margins, personnel, ratios, customer counts, top ten brands. Simple stuff a buyer would ask for in a due diligence package.
You just have it done BEFORE they ask for it. Graphs. Trends are very important here. Did I mention graphs?
3. Sell the future not the past. Make the case for the future. Make the trend your friend.
4. Sketch out a simple term sheet as to the deal you might consider. Very simple term sheet.
5. Have at your fingertips Vision, Mission, Strategy, Tactics, Objectives, Values and Culture. I know you can barely get that stuff done for yourself but this is yet another example why it is so damn important. A Big Red Car can hope, no?
Once you have this stuff done, update it every three to six months to ensure it is current. Assign someone to do the updates and keep it current. When the time comes, you will be ready. You will be able to provide instant information. Time will be your friend. The future belongs to the prepared.
You, my friend, are prepared to seize the opportunity the future will present.
Need a chat? Need some assistance? Call The Boss 512-656-1383 or email him [email protected] This is the kind of thing he helps CEOs, founders and entrepreneurs with daily.