Robbie BrownWritten by

Is it Time to Sell Your Business?

Industry News| Views: 997

Almost without exception, every independently owned fishing tackle/sporting goods retailer will need or want to sell their business at some future point. This fact holds true also for family businesses wherein multiple generations are involved.

Why are businesses sold? Consider these potential reasons: lack of profits, age or illness of the principals, overpowering competition, significant changes in the retailer’s consumer base, prolonged economic turn down, the departure of key personnel and loss of interest in the business adventure, just to name a few. Whatever the reason, the time will ultimately arrive when the ownership says it’s time to get rid of the business.

On the positive side, selling one’s business can be an important element in the creation of a worthy retirement plan with sufficient funds to last the owner throughout his or her retirement years. 

Usually, ownership will agree with the above statements. The proverbial questions are: (1) when is the right time to sell the business, (2) how do I do it and (3) how much can I get for my store(s)? Let’s tackle them one by one.

When is the right time to sell your business?

With regard to question #1, when is the right time to sell your business, there is no hard answer to this question. That said, the better time to sell is when (1) you don’t need to sell, (2) when your sales are trending up not down (3) when you are approached by a potential purchaser rather than the reverse.

How do you begin to sell your business?

Regarding question #2, how does one begin to sell their business, you are best off to use an intermediary to spearhead the search for a qualified buyer. If you, the owner says, “I have a great business, do you want to buy it,” you already will be at a price disadvantage. It is always far better to have a potential buyer approach you verses the reverse.

You can open the discussion of acquisitions by approaching a qualified buyer e.g. one of your competitors and asking them if they are considering selling their business. You can also run blind ads or use your intermediary to approach vendors, distributors or competitors to discover potential buyers.

How much is my business worth?

As regards the big question #3, how much can I get for my business, the best answer is, your company is worth exactly what some buyer is willing to pay for it. There are, of course, some industry bench marks which suggest deals are routinely made with a multiplier of 4 or 5 times your three-year average of profits before taxes.

It helps a lot if you use an advisor or consultant who has previously negotiated buy or sell contracts as there is consierable points to be negotiated such as price, terms of payment, stock versus asset sale, employment contracts, holdbacks, guaranties, contingent liabilities etc., etc.

I will say this, if you appear anxious to sell, you will be at a negotiating disadvantage. Here again, using a third party negotiator supplements your personal attachment to the business in favor of having someone who knows the game and how to extract the best price for your business.

And, of course, you will need capable legal counsel to advise you on legal matters. I don’t recommend having your attorney do your negotiating . . . this is where your third party negotiator effectively comes into play.

After owning your own business for thirty or forty years and then selling the enterprise to a qualified buyer for 5 or 10 million dollars, this then becomes a soft and sweet conclusion to a wonderful career. Happy landings!

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