The knowledgeable combination of Chris Muccio and David Burns brought about a sharp but easy to follow discussion on how to sell your business effectively. If you’re looking for some great selling knowledge this interview is perfect for you.
Let’s drop in on their conversation. Click here to listen to the conversation as well.
…Chris: David, you’ve been involved with buying and selling businesses since the 1990s. What has attracted you to that field and can you share more about your background?
David: I became interested after I left my job at Ernst & Young, that’s when I started my first company. After three years, I decided to sell it. I went through the process myself. Looking back at it I made a lot of mistakes. But, the whole process of dealing with the buyers, collecting information and negotiating really attracted me to pursue it as a career. That was the main reason I went back to Vanderbilt’s business school, I graduated and was very fortunate to work on Wall Street for Goldman Sachs.
Chris: Great story! Basically, you learned from your mistakes and built a career around that. Given your expertise and experience in this area, let’s shift the focus of conversation to the business owner who’s just starting off. What are some of the biggest factors that they should be aware of when it comes to selling their business?
- Do I really need to hire somebody to help me sell my business?
- Why can’t I do it myself if I feel like I have the type of business and background? Really, I’ve got the gumption to try to do it on my own.
The two things that bifurcates that decision process are going to be if you’re business is doing less than $5 million in revenue. You have a pretty good shot to sell that business yourself and avoid business broker type commissions.
You’re always going to be your own best advocate of what your business can do. If you think about it you’re selling your business, that’s really just the last sale that you’re ever going to make in that type of business. So you view your buyers as your last customer.
Now if you’re doing more than $5 million in revenue, I would suggest to hire some type of intermediary. I would consider using an investment banker. They have access to private equity buyers that, as an individual, you’re really probably never going to be able to get to.
That’s how I would address the questions of, “Hey, can I do this myself or should I go and hire a professional to guide the process?”
Chris: Very Interesting. How do I, as the business owner, know when the right time is to sell my business and how do I do that in a way that helps me maximize my return?
David: There’s really no right time to sell your business. When you wake up in the morning and you’re having your cup of coffee and you think, “I really don’t want to go in the office today,” that’s probably a telltale sign that you might want to think about exiting the business. If your heart’s not into it, all you’re really going to do is potentially damage the value as time moves forward, because you’re not committed to growing the business. I think at that point, you’ve got to ask yourself, “How does my business look to the outside?”
If you’re on a nice growth path the buyers will identify that. There’s really not a wrong time to sell, if things are going your way.
The biggest mistake I see people make is when they say, “Well gee, everything is going great right now. There’s no sense in me selling.” But then when things start to turn negative, they rush and say, “Okay, I want to sell right now.”
Most people buy stocks when they hear good news about the company. You really don’t hear people running out saying, “Hey, go buy this stock. Their revenue’s down 30% this year and it’s probably going to be down another 20% the following year.”
You’ve got to think like a buyer when you’re a seller. If you want to sell your business, sell when things are going well, and leave some of the upsides to the next buyer, that’s what you’re trying to do and exit at the highest valuation.
Chris: Now let’s say that we are a small business. I’ve got a lot of positives going on with the business, and I am thinking like the buyer. I’ve got a great asset to sell. What are certain steps I should take when moving that process forward and trying to sell my business?
David: There’s three key things that a seller needs to think about when they’re about to embark on this process.
The first one is time. I think people get frustrated in the process when they want to sell their business because they have unrealistic time expectations and they’re completely unrealistic in terms of what the process may entail to get to that successful sale.
Don’t rush into it. There’s a lot of preparation. The analogy I use is it’s like building a house. You’ve got to get the foundation down before you can even attempt to try to sell the company.
Most peoples fear, as the buyers, is that they’re buying something that you know is wrong; they’re buying a ticking time bomb. Get the buyer comfortable, that you’re exiting for reasons that aren’t related to the business, that you want that buyer to say, “Hey, I see. It looks like you’ve got a lot of good sales in the pipeline. It looks like growth is good.”
The single most important piece of advice that I can give people who are contemplating selling: make yourself completely invisible to the business.
I’ll meet with a company that’s a terrific business. The problem is, the owner or the CEO or the founder, they’re the entire business. The buyer comes in there and thinks, “Wow, once he/she leaves, I’ve got to rebuild the whole office.”
You have to make yourself look like you’re not part of the business, because then the buyer doesn’t feel like when you walk out the door, all the business is going to follow you. I think people underestimate how important that is to the process.
Most importantly, if I want to sell my business I need to not be viewed as integral to the business going forward.
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