Putting your business up for sale while it’s on top is probably the best decision you will ever make. It’s also probably the hardest decision you will ever made.
When you’re an entrepreneur who has built a company from the ground up, you naturally develop strong emotional ties to the business, and rightfully so. After all, you sacrificed your energy, time, relationships, and money to help the company thrive. And now, when the company has finally reached an all time high, I’m telling you to let it all go? I am.
Business is not about emotions or feelings. It’s about doing what makes the most sense for your company and most importantly, your future.
The harsh reality is that there is such a thing as waiting too long to cash out on your company. When an originally small business starts to outgrow its CEO, for example when it starts to generate $5 to $10 million in revenue, that’s when it’s probably best for the CEO to swallow his or her pride and pass the baton to a bigger company with a better equipped management team that will have the resources needed to continue to operate the company efficiently. But few entrepreneurs follow this example.
Instead, most entrepreneurs end up being forced to sell once they are faced with a nasty divorce, a split with a partner, a declining economy, or even worse, bankruptcy. When your company is faced with one of these difficult challenges, the pool of potential buyers starts to decrease, if not disappear. Subsequently, once your company is on a downward trend, you lose the ability to negotiate a good deal because your buyers automatically recognize that you are getting desperate. They know you don’t have the leverage to negotiate a fair value and set of terms for your company.
Is it starting to make sense why quitting while you’re ahead is actually a wiser entrepreneurial decision?
Good deals come from competitive buyers looking for profitable investments. When they are shopping around, they are looking for companies that prove to be capable, that are on an upward trend, and that have evidence of a solid past performance. Some larger companies don’t even need to see much to be convinced. As long as you can prove your company has consistent growth, strong working capital, and minimal (or no) expensive debt tying it down, you have a good chance of finding a bigger and better home for the small business you helped create.
Understandably so, all of this is easier said than done. But think about it this way, it’s worse to see your company dilute to nothing, than to see it continue to flourish in somebody else’s hands. Don’t wait too long and secure a lucrative deal before it’s too late.
Holden Buckner is a Mergers & Acquisitions professional with over a decade of experience. To learn more, please visit Holden Buckner’s main website.