Should I sell?
Whether to sell is one of the most difficult decisions a CEO ever makes.
01 The Logical
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02 The Emotional
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The decision to sell involves a huge number of factors, most of which are speculative or unknown.
A good rule of thumb is if:
But if one of the three conditions is not true, you should start preparing for a sale. |
The emotional part of the decision is usually schizophrenic.
How can you ever sell out your dream? How can you sell after you’ve recruited every employee and sold them on your vision? And yet, how can you walk away from total financial independence for yourself and every member of your family? Aren’t you in this to make money? How much money does a person need? |
03 Reasons to sell (and how buyers rank them)
You’ll almost always do better financially by not selling your business (if the company continues to perform!)
But at some point the complexity and risk of life make it so we have to transition. There are some patterns in good and bad reasons to sell, and we rank them below from most to least attractive in the eyes of a good buyer.
> Legacy
The reasons above are very generic. The most common reasons those we've partnered with have come to us are:
Letting emotions drive your transition plan often ends in frustration. A better approach is to be deliberate about what you want and when you want it. Filling in the blanks below is a good start:
If you’re wrestling with whether to sell your business, drop us a note at chat@pracinco.com
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But at some point the complexity and risk of life make it so we have to transition. There are some patterns in good and bad reasons to sell, and we rank them below from most to least attractive in the eyes of a good buyer.
> Legacy
- “My team and customers need great support and it’s time to prepare to pass the torch."
- “I promised my spouse that at age 65 (or when I hit my number), we would do all the things we never had time to do before."
- “My doctor (or spouse) says I’m going to kill myself if I keep going at this pace.”
- “My heart isn’t in it anymore.”
- “I’m ready to wake up in the morning and think about something else.”
- “I can’t manage through another recession."
- “We’re growing faster than I know how to handle.”
- “We’ve hit a ceiling and I’m not sure how to break through it.”
- “I’d rather keep my earnings than reinvest them in the company, which is frustrating my senior team."
- “I’ve heard of other companies selling now for insanely high prices.”
- “We’re facing some real risks. Let’s get out before one of them gets us."
The reasons above are very generic. The most common reasons those we've partnered with have come to us are:
- De-risking their investment - at some point, hard-earned equity should turn into cash. We've helped owners cash out entirely or partially while staying on to get a “second bite at the apple”.
- A step back from the daily grind - Owner/operators have partnered with us to find relief from an exhausting workload and focus on the contribution they most enjoy making.
- High-priority growth initiatives - Our capital and experience have freed management teams to pursue initiatives such as sales team expansion, executive hires, and new product offerings.
- Strategic acquisitions - Acquisitions can help drive transformation by increasing the scale and scope of a company. They can accelerate geographic, customer and product expansion.
- Join a community of CEOs - Our experienced CEOs serve as resources to each other. This rare community can prove a valuable sounding board when wrestling with new challenges
Letting emotions drive your transition plan often ends in frustration. A better approach is to be deliberate about what you want and when you want it. Filling in the blanks below is a good start:
- I want between $X and $Y after satisfying all debt, tax and transaction costs
- I want to work for X more years before selling
- After selling, I’d like to still play the following role (ok to work until you kick the bucket or leave the day you sell)
- The ideal characteristics of a buyer are:
- The ideal timeframe to sell is within X years, but I’d be happy to sell within Y years
- The top 3 non-financial goals for the transition are:
If you’re wrestling with whether to sell your business, drop us a note at chat@pracinco.com
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