Deciding to sell a business is a hard decision. Let’s face it; a lot of your life is wrapped up in your work. And if you sell, everything is going to change.
Selling is tough because you won’t be in charge any more. Many people admit to struggling with depression or sadness after agreeing to sell a company. That doesn’t mean that selling your business is a bad decision either. It all depends on your situation.
If you are like many pallet or lumber companies, you have family involved. This makes the decision easier and tougher in some ways. Do you have a succession plan in place? Do any family members want to take over? If you are married, what does your spouse want? What do you want?
A good exercise to determine what key stakeholders want is to answer the following questions privately after some soul searching. Write down your answers and then share those with your spouse, other key family members or other company stakeholders. Then come together for an honest discussion about the areas where you agree and then turn your attention to where you disagree.
a.) When it comes to the business and my life, what do I want for the foreseeable future?
b.) What goals do I have for the business transition? How would I know if it is a failure or not?
c.) What financial goals do I have for the transaction?
d.) What is my deepest fear about the next phase of our lives?
e.) What am I willing to give up to see my partner/spouse has a win too?
f.) Who in my family may want to take over and run the company? Are they ready? What would it take to get them there?
The next step is to conduct an analysis of your business assets and liabilities. You may want to have an independent business valuation done. Or you can do one yourself. There are books out there to help. Make a good honest assessment looking at your numbers, strength of your management team, physical assets (especially real estate), long-term relationships and contracts, etc.
Then you would brainstorm possible options for how you can sell or transition your company. It may be a local competitor in the city, state or region. It might be a larger regional or national player looking to grow through acquisition. Maybe it is someone who wants to get into the pallet business for the first time. Or possibly, you could sell to your current employees in an agreement over time taking payments from the profits while renting out the land/building to the company for residual income. Brainstorming doesn’t mean you reach out to all of these people. You simply are trying to gauge the market and develop a potential list of suitors. It is important to keep certain details private to avoid eroding customer confidence and relationships.
Unless you already have a buyer in mind, consider hiring a business broker or real estate broker. Possibly talk with an auctioneer to find the value of the equipment and real estate assets. These third-party experts can help you find the right buyer while preserving confidentiality. They also can guide you in how to improve your operations or property to get a better price. When it comes time to sell, they can provide valuable insight on how to present your company in the best possible way.
The next step is to prep a business to sell. This can be the hardest thing to do, and it may take the most time. It all depends on how well your business has been run in the past. Consider the advice in this article we published back in 2019 titled, “If You Had to Sell Right Now, Could You Sell Your Pallet Business?” [Link: https://palletenterprise.com/view_article/5382]
There are some common mistakes that company owners make when it comes to deciding to sell. The first one is that they wait too long to sell or don’t plan ahead. By the time they decide to sell, the business has been stressed or the owner is fried. And most buyers want to find an enterprise that is on the upswing with good people running the ship. If your business has become distressed, you wont get much for it.
Another common mistake is that owners jump on the first business broker they meet. You want to do proper due diligence and investigate your options. Talk with a number of brokers, possibly interview former clients, and research them online to see what others say. You want a realistic broker who will work hard for you.
To stop investing in the business is a decision that will bite you in the butt when it comes time to sell. Prepping to sell is when you need to make sure your accounting system and records are in order. Go ahead with delayed maintenance or upgrades as reasonable. Start turning more daily responsibility over to employees who are not the owner and train them so that they can truly help run everything when you are gone. Continue to promote your company online, work on your website, social media and your public face to the world.
Nailing the right asking price can be difficult. Many owners ask too much or too little for their business. This is where the right broker makes all the difference. And you may have to do some of your own research to identify what is reasonable.
Finally, you have spent a lifetime building your business, and the last thing you want to do is turn it over to the wrong person. You aren’t just looking for the biggest check. Yeah, you want to get paid. But ultimately, you want to find someone who will continue your legacy and take care of your employees and customers. The peace of mind associated with the right new owner is worth every penny.
The number of mergers and acquisitions in the pallet industry has really escalated over the past few years. Now, is a good time to be asking these questions and prepping your busines for the future even if you think you would never want to sell it.
