Don’t Wait Too Long…
From the Archives: This was written back in 2016(!) when I was a Partner with Murphy Business Atlantic. A tale of warning that I believe still applies today…
The next generation will pass on the greatest wealth ever seen to the next generation- unless we screw it up. The baby boomers are in the process, and will be in that process, for may years to come. It’s only just begun.
How can we screw it up you ask? You did ask, didn’t you? Easy…..
The biggest mistake we see is declining results. Sometimes its three or more years of a steady decline, and sometimes its more dramatic, like a one-year cliff fall. In every instance, the owner points to the way it used to be… ’but a new owner can turn it around easily. I just haven’t been working at it lately. It’s still a good company, and can you get me what it was worth in 2013?’
A number of things happen as we lose interest. Equipment deteriorates, because we don’t want to continue to invest, because we haven’t decided on our future plans. That fifteen-year-old, backbone of the company asset, is old, if not dead. The inventory is old. It’s a bad sign if Sally Ann won’t pick it up, and they look at you like you have three heads when you try to drop it off, “have you tried the furniture bank?’. The building needs new siding, a new water heater, and only leaks when it rains. And its Nova Scotia after all, so it always rains!
Our health is also at risk. We need knee replacements, hip replacements, bypasses, and are still waiting for cloning to become a reality. And how do they get my brain into that other high-tech 20-year-old body again…? That is going to happen…. unfortunately not during our lifetime!
Revenue is down again. Nothing makes a bank happier when financing a new acquisition, with lots of goodwill, than declining revenue. It gives them the excuse they want, to say NO.
Apparently no one outside of IT (Google, Yahoo, etc.) gets paid for potential. Your company may have potential but the buyer sees that as their upside, not yours.
A number of retiring sellers have told us they are shutting it down if not sold by X date. And they mean it. They are either totally sick of work, don’t need the money, just discovered they have a brain aneurism (or a sore foot), or their spouse told them to do it! That is a tough backdrop for selling a business. The average business takes 8-10 months to sell.
Our children have other interests. They are not going to move home from Alberta with their teen kids, after having lived there for ten, fifteen, twenty years- to take over the family business. And how do you divide a manufacturing business between a lawyer, a CA, a stay at home mother, and an environmentalist now living in LA. BTW beware the lawyer!
Didn’t some famous investor advise us to sell high? Warren Buffett, Donald Trump, Cheech and Chong?
Everything is in place to successfully sell your business now, while it has vitality. Take advantage of the Capital Gains Exemption (its like working five years but getting paid for ten), and Family trusts (finally get something from your spouse, or those rotten kids).
Remember, no one wants to buy a company from Eeyore!
Disclaimer: I am (thankfully) not a lawyer, nor am I an accountant. If any of this sounds like legal/financial advice, it's not. Take everything I say with a grain of salt. But not too much - I hear it's bad for your blood pressure.
