Chris Curtin

As the in-house AVA and leader of the Central Florida Office for Bankers Advocate, business owners often ask me how to predict the right time when to sell. I know from recent conversations, that many owners feel they missed their chance to exit a few years ago when the market was ripe for transactions. Now the question revolves around when the market will return.

Let me suggest that, as an entrepreneur, you have the opportunity to develop a more reliable approach to timing your exit, than attempting to predict the cyclical nature of the mergers and acquisitions market. Knowing when to sell your business requires timing. There are simple steps you can take to gain control of your own timing, whenever that may be. These steps require a focus on what you, and only you, can control.

The first step is to know what your exit will look like when you arrive, regardless of when that might be. For instance, you should know at any given moment how much after-tax “cash” you will need from the sale of your business to meet your goals. Do not just pick an arbitrary number out of a hat because it sounds good. Get specific and know why you have that number as your target when to sell. This step is relatively simple if you hire a certified financial planner to help you update or create your personal financial plan (you can contact us for a referral to a trusted advisor in this area if you do not already have one). Be sure that your plan takes into account the lifestyle needs you are seeking, a reasonable rate of return you can expect from the investment of your after-tax proceeds, and any required adjustments for taxes and inflation.

Now that you know your target amount of cash, you need to know your current business value. This is definitely a situation where you get what you pay for. While you could arrive at an estimate at no charge by contacting a business broker or using an industry multiple for your own calculation, you will actually be doing yourself a disservice. More than knowing the value your business could fetch currently, you want to know why your business holds its current value and the areas you need to improve to increase that value.

A third-party valuation is certainly a worthwhile investment at this time. Think of your valuation, not simply as a number, but more importantly, as an analysis of your Strengths, Weaknesses, Opportunities, and Threats (SWOT Analysis). If you invest in a certified appraisal, you will gain the business intelligence you need to close the gap between your current value and target value.
Share your valuation with your trusted advisors including your financial advisor, CPA, attorney, and chosen transaction advisor. Enlist their help to interpret, identify, prioritize, and make a recommended task list that can help you build value and overcome weaknesses as efficiently as possible. It should be clear to these advisors from your financial plan and complete valuation report, what your objectives are, and the areas you need to address. Having this information available before you meet with your advisors keeps you in control and will save you a considerable amount of time and expense getting their help.

Finally, implement your task list. Be honest about what you can do for yourself while maintaining your business operations, and what you may need to hire out. If you schedule your tasks in a manageable way, hold your advisors accountable, and ask them to do the same for you, you will be well on your way to achieving your objective – timing your business exit on your terms.
At the completion of each tax year, have your valuation updated, which should only require a minimal investment. When you cross the threshold value you identified in step one, the timing is right for you. However, do not be surprised if you are still not ready to exit. The improvements you make that build value in the eyes of your future acquirer; fulfill the same needs you have to be a satisfied owner of your business as well.

Do you know when to sell your business? Bankers Advocate is here to assist you. We have served a great number of clients over the past decade in exiting or entering business ownership. Get in touch with us today.

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“The B2B CFO people do good work. Here is an article on how to grow a business from one of their consultants, Frank Gnisci.”
– Chris Curtin

Although every business wants to grow, some types of growth are certainly better than others. Consider the following 2 options:
1: Grow Sales by 20%, and net income increases 50%.

OR

2: Grow Sales by 50% (a lot more work and risk than Option 1), and net income only increases 20%.

The best way to grow is when net income growth out-paces sales revenue growth. For every additional unit of sales, we want to generate more profit, not less. How can we accomplish this?
Jim Collins, the author of Good to Great, found that the more an organization sticks to its core competency, the more opportunities the company had for the good kind of growth – the growth where net income increases faster than sales!

What is your core competency? It’s what you do well and, when you do it, you’ve proven that it can make money. If you are a trade contractor, then it is your trade. If you are an attorney, then it is the law. If you are a widget manufacturer, then – I think you get the point.

I have experienced many occasions when, in its desire to grow, a company strays from its core competency and involves itself in a business and industry it doesn’t know very well. Sadly, these new ventures begin to drain time and resources (and most importantly, CASH!) from the main business. In essence, the core competency of the firm subsidizes a less successful venture.

Sticking to your competency requires a great deal of discipline, but it is the best way to grow your company. By sticking to your core, you will find the most profitable and enduring growth opportunities!

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“I enjoy Doreen’s work and writings. Here is an article from her about the importance of organizational change.” – CC

For firms to compete today, they must change to meet the demands of the business environment. In fact, change can be used to create a competitive strategy for your organization. Now picture Sheila the CEO of an organization that is concerned about changing her organization to reflect a competitive strategy in the organization. The strategy centered approach to change might reflect some of the following:

• Introducing a new produce or service
• Entering new markets
• Use of new forms of marketing
• Initiation of Internet sales to direct selling
• Forming alliances or joint ventures with other organizations
• Modifying relationships with suppliers

To be successful, changes in competitive strategy will require a consistent change in people, work roles, organizational structure, and technology. Internal changes in the organizational approach to improve human capability will require organizational learning and an alignment of the strengths and values within the organization. By aligning the strengths and values within the organization, it will improve the overall success of the competitive strategy and meet with the long-term goals of the organization.

A common mistake is to implement a new program without first diagnosing the problems that are confronting the organization. Management programs and structural changes often fail to solve organizational problems and sometimes will make them worse. The benefits that can be obtained from a change made in one area can cause problems for another. Before initiating major changes within an organization, senior management should be clear about the problem and the objectives of the program. The organizational diagnosis can be made by senior management, an outside consultant, or a task force. It is often more successful when an outside consultant is involved because it offers an unbias decision to the diagnosis. Outside consultants trained in organizational development will bring more success to the project.

Doreen M. McGunagle, Ph.D. is a corporate organizational speaker and has a doctorate in Organization and Management with a specialization in International Business.  As CEO of Global Strategic Management Solutions, a consulting firm that specializes in assisting organizations grow and improve their performance, and brings 25 years experience working with Fortune 1000 companies.  Dr. McGunagle is the author of The Chinese Auto Industry: Taming the Dragon.   To find out more information about Dr. McGunagle corporate speaking engagements and consulting availability, please visit www.globalstrategicmgmt.com or call 561.208.1071.

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