I often get emails and calls from business owners who want to sell a portion of their business: A territory, A route, A percentage. Certainly over the years we have sold portions of businesses, most frequently routes like pool routes and lawn routes or a book of business like property management. However it has become harder and harder to do so….the question is why? The second question is why do business owners think this is a good idea.
All business sales are difficult and scary….lack of books are records or the poor quality of books and records are two of the top 10 reasons businesses do not sell. So when it comes a primary driver of complexity on business sales the records associated with the book being transferred is problematic.
This coupled with buyer sophistication as these books tend to be smaller deals with novice buyers unsure how to value or even read financials it has become next to impossible to transact these types of deals.
The next question that arises is why do sellers think this a prudent course of action? In the least three consecutive calls on this front each seller has been near or at what is traditionally retirement age. Anecdotally we have three issues occurring: 1) Sellers need to slow down but can’t fully pull out due to lack of financial planning 2) The sale triggers a reality check that they are nearing the end of their working careers, and 3) They have a psychologically difficult time letting go.
These three issues are just the tip of the iceberg with making deals like this hard to transact. Further complicating is the normal market conditions at a macro level. For example, right now we are in an inflationary crisis with historic labor shortages. Buyers who atypically buy these types of opportunities tend to be looking for income replacement. They do not (although they should) look at acquisitions strategically like private equity groups.
So what to do. In each case where a seller has called I have counseled to keep it and run it till you’re ready to go or exit en mass. The minute you remove the credibility of financials to back up an opportunity you make it infinitely harder to sell. Sellers think it easy as they know what a route or stop or book can do but buyer wants and needs are the opposite and they do not have that experience.
So….plan for retirement and your exit….do what your advisors tell you to do with Tax Planning, 401k and SEP implementation so you have the ability to make the hard decision to sell.
For more information on selling your business please call 321-287-0349 or email me at mike@tworld.com.