Create Your Smart Exit™ You Can Make it Happen!
You get things done. You make things happen. You figure it out and solve problems every day and you’ve been amazing people for years. You diagnose problems and fix transmissions and much more. You’ve successfully operated a small business. You’ve helped many, many customers. You’ve managed employees, paid bills and taxes, and most of the time, had money left over.
Properly preparing and selling your business is just one more problem to solve. You know the drill. Evaluate the situation. Determine the resources you need. Test trial solutions. Use specialized tools. Surround yourself with expert knowledge and research to reduce errors and avoid disaster.
There are differences. Yes, you’ve fixed up cars and maybe houses then sold them. Selling a business ― not just any business but your business ― is different. This shop, well, it’s like your favorite jeans. It’s like a pair of gloves or your skin itself. Now to prepare it and sell it, well, what are you going to do?
You’ve got to create a new future, something better to move towards. This is why you must plan now. Don’t let it crash into the dirt because you’ve had an auto accident or heart attack and can’t finish the job yourself.
After being “the boss” for so long, identifying a person with potential like an employee or a tech looking for a job is seeing a diamond in the rough waiting to be cut and set in a ring. You’ve got that opportunity. In previous issues we discussed the different potential buyers of your business. Yes, it takes time to develop a “new leader” and train them to become a manager, then a partner who buys you out over time. Your return on investment can make it very worthwhile.
There is a group of transmission business owners working together every week or few weeks to discuss what’s working and what’s a struggle achieving their Smart Exit. There is group and private work to allow each business to craft its own strategy and timeframe to better prepare. You might be ready to sell now and wish to increase the value as you prepare to sell to have more net proceeds after the sale.
The “selling your business” phase of an entrepreneur’s career is quite different from the starting and administrating phases. When we start an enterprise we can do it part time. We can put the new company on hold and resume it later. We can start, fail then start again until we get it right. Walt Disney and many successful entrepreneurs had several false starts. When we’re in the administrative phase we can keep business the same, grow slowly, cut back and adjust depending upon the economy, our employees and our abilities and resources. By comparison, when we “sell” there are new risks in addition to those you have already faced.
You can tell too much or too little to prospects interested in buying your business. If you tell too much you might a) discourage them or b) create a competitor who takes what you’ve said as research, learning your strengths and weaknesses, to open a shop down the street.
You could tell too little and a) not inspire the shopper with what their potential could be purchasing your shop, or b) they see too optimistic a picture, buy the business but cannot realize the sales and profit they believe you promised and take you to court to sue for a refund because of misinformation.
Other risks are them buying, taking over, and failing at it. They fire or run off your veteran techs who they promised to treat fairly. They botch up jobs from customers you worked years to win. You’re embarrassed with customers and community colleagues you’ve known for years who have bad experiences and heard the horror stories. For years, the “good” name of the shop is one you were proud of and worked hard to keep untarnished.
Worse yet, you agree to carry a loan from the buyer. The new owner depletes your inventory, breaks or takes your tools, ruins your reputation and you have a legal battle to regain control or want to but there’s no one to find whom you can sue. Now you must salvage your company, rebuild the reputation to sell it again.
Your staff becomes uncomfortable with your talk of selling, shoppers walking around asking questions, conducting interviews. You don’t have employment agreements with staff and a key tech or two, ask for a bonus to stay or they’re moving on, leaving a shop full of unfinished jobs with delivery deadlines. Pay up or they’re gone.
You get a sweetheart offer. It’s from an experienced, sophisticated buyer. You accept the offer then go through 3+ months of “due diligence” from his accountants who take over your office. There’s a clause in their offer that if you can’t substantiate your income estimates for this year, they offer to pay a substantially reduced amount based upon their revised sales and profit estimates. They may offer you the chance to operate the business for a period of months and if you can produce the sales and profits you’d predicted then they’ll pay the full price. You’re in a “lose-lose” situation. Take the much lower price or work for them to earn the full price. You accept working for them and it’s much different in your shop with their administration, goals and requirements than when you owned it.
Or you get a good offer, all goes smoothly, but this is all new to you and you don’t do all your planning and sale work, because, hey it’s your first time. You forfeit 2/3 of the sale price in taxes and transaction fees.
It’s said half of all business sales have a significant flaw and this is regardless of the size of the businesses sold, large and small, with attorneys and with just a buyer and seller. Business sales are tricky. Preparing and selling your business is like remodeling your kitchen, bath and bedroom while trying to live there and have a “normal” life.
Get expert help to assist you in preparing, planning, and researching. Doing this slowly and doing it “right” is better than fast and sloppy. It’s a real challenge to: a) continue operating the business while, b) growing it within your cash flow constraints and c) preparing then executing a successful sale. Get expert help to make a Smart Exit™!
John Anderson shares key areas of opportunity in every successful business exit strategy in this six-part series of articles written especially for the members of the Automatic Transmission Rebuilder’s Association (ATRA), and published monthly in the ATRA Trade magazine. The Smart Exit™ Series for Business Owners leads up to a half-day Smart Exit™ Workshop at the Automatic Transmission Rebuilders' Association annual international event - Powertrain EXPO in Las Vegas October 19-22.