SELLING YOUR BUSINESS IS LIKE
RUNNING THE MARATHON!

Once you have made the decision to run in the biggest race in your life, you have to prepare yourself. You assess your lifestyle, your eating and drinking habits, you decide on a coach or running club or simply read a book. You solicit the support of your family and friends. You set aside the time to train, and you begin training.

Similarly selling a business is not something you do every day, and it may well be the most important transaction of your life. It's vitally important to create a “dream team” of professionals who will push to get the transaction done while looking out for your best interests. A battle-hardened transaction lawyer will help you get the transaction completed, whereas a more conservative corporate attorney may get bogged down in the negotiations and end up killing the deal. A tax specialist needs to be part of the team; it is not how much you sell the business for, it is how much you get to keep that counts. An experienced business intermediary can easily add significantly to the value received by finding the best synergistic buyer, and negotiating effectively, using the right structure.

Then comes the discipline. Regular training, gradual buildup, eating proper foods, shedding that “extra weight” so you don’t have to carry it for 26 miles, proper rest and personal habits, organization of support from your family and friends, obtaining the right equipment, perhaps a chat with your doctor, are just some of the things you will do during training.

Preparing your business for sale is like that. You need the support of your family. They must be onside and supportive of the life altering changes you are contemplating. You then need to assemble your divestiture team, establish who to bring into your confidence, establish a strict confidentiality program to maintain confidentiality (breach of confidentiality can result in the loss of key employees, customers, or suppliers), establish realistic value expectations, and prepare documentation to tell an accurate story about your business to qualified prospective purchasers.

The true value of any business lies in the future of that business as seen by the prospective purchaser. It is the intermediary’s job to prepare such documentation, that show the “true earnings” of the past, the present situation today and the “ future earning capacity” of the business and support that future with appropriate research on the business, the customers and suppliers of the business, and the changes that are anticipated in the future. A professional intermediary leaves no stone unturned in preparing an accurate look at the future of his client’s business.

On Your Mark, Get Set, GO.

You’re off. Running the race requires a plan. You must pace yourself so you don’t burnout or flameout. You have got about 4 hours to complete those 26 miles. Your support team is strategically placed at key milestones to encourage you on. Race officials are located at the mile markers with water, and at strategic locations with energy bars and Vaseline. The crowd is encouraging you to finish; as they say in Montreal “latches pas” (don’t quit).

Implementing the selling process to transfer your business must also be paced and well coordinated. There will initially be a lot of well-intended “lookers” (potential buyers) who must be qualified to the standards of the Robbinex 3M program™. They must have the M oney to acquire, the ability to M anage and the M otivation to close. Confirming the money is relatively straightforward; a simple letter from a bank or accounting firm will usually suffice (never a lawyer, for the lawyer is an advocate of the buyer). Confirming the management skill set of a prospective purchaser takes a little more work; past experiences, references, and credit history are just a few of the things that need to be reviewed. The most difficult of the Robbinex 3M program™ is: Confirming why the buyer wants to buy; is he simply putting in time with no real intent of closing? Is he on an espionage project for a competitor? Is he a competitor simply looking for an edge? Is he truly capable of operating or will he get cold feet and not close? Is there a secret agenda? The list of motivation questions is complex and must be thoroughly analyzed. A competent intermediary will ferret out the true reasons that should provide comfort and confidence to aid in developing your negotiating strategy.

Once the list of interested parties is short listed, then comes the often-tedious process of obtaining a written proposal from the potential buyer(s), without revealing the anticipated realistic price expectations of the seller, or of other buyers. Then the “back and forth” between the teams of professionals supporting each side: lawyers, accountants, tax specialists, and other consultants such as technocrats, bankers, marketing experts, etc., as the letter of intent is negotiated.

Then there are the imponderables such as: the weather, extremely hot or unexpectedly cold; or it is raining; or the wind is quite strong. You get the feeling you’ll never get there, that it will never end. Then you look up and there is your support team and family, urging “latches pas”.

Then the “Deal Fatigue” sets in: will this transaction ever reach the finish line and will you ever sell your business? But wait, we are only just at the “Turn”, there is still due diligence to complete, the final negotiations involved in writing the formal agreement, and then the actual closing to go through.

Once the due diligence process starts, it is similar to a mini marathon itself, in the middle of the marathon. It takes patience and perseverance to attend to all the details that are usually reviewed, particularly if we are selling shares.

And remember, “heartbreak hill” is still ahead.

Approximately one in four letters of intent (LOI’s) signed, actually close. Due diligence often uncovers something that the purchaser wasn’t expecting, that in the purchaser’s mind, will impact his expectations of the future performance of the business being acquired. A professional intermediary will already have conducted due diligence before commencing negotiations, and will have delivered a clear precise summary of the business to the buyer in order to avoid surprises.

There are many milestones in a marathon and as you move into the final stretch you need to start pacing yourself because now is not the time to flameout or burnout. You need a reserve for the anomaly that every race has: Brooklyn bridge in New York, The heat in Las Vegas, Hogs hollow in Toronto.

During the final weeks before a closing, a professional Intermediary knows at some point, he will have to intervene to deal with the emotions that inevitably flow within a transaction. This could involve either the buyer or seller side or both.

Seller Remorse is an issue that erupts unexpectedly in a large number of transactions, and usually has to deal with “Life after Business” and other family issues such as: should my son (or daughter) be given the opportunity to carry on the family business. Whereas the buyer has Second Thoughts surrounding issues such as: “is this truly the right move for me and my family? (Or if a corporation: is this really the best deal for the company?) A competent, experienced intermediary will have dealt with many of these issues in advance.

Dealing with the personal and family needs of the Seller early on in the process will virtually eliminate “Seller Remorse” prior to closing. Children should be psychologically tested to determine the likelihood of them successfully running the family business; and both Mom and Dad should also spend time with an Industrial Psychologist to ensure the necessary steps are taken to thoroughly enjoy “life after business”.

Understanding the buyer’s goals and objectives, capacities and capabilities, resources and financial capability coupled with an intimate knowledge of the business and what the future holds for it, will go a long way to reduce “Second Thoughts”, the fears of the future unknowns and the chances that the buyer will change his mind.

Crossing the finishing line is similar to the actual closing and receiving the “Big Cheque”. There is the lack of the “winning high”, because it is not like winning a race! You are too tired and exhausted! It is more like earning a medal that you will have for the rest of your life.

Remember , the sale of a business is never a sure thing until it's done. The only sure thing is that selling a business is a long, arduous, and complex process that can never be called simple. Retiring from a business can be the most harrowing, and most rewarding experience in the life of a Business Owner . Take it slowly. With a strong support team, careful planning, a long-term strategy and professional guidance, each step of the process can add value to the company and ultimately brings you to “The Finish Line ” .

 

 

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