Sara Berry pulled into her parking space. She let out an audible sigh.
She looked up at the historical building that housed her company – BabyBerry – and remembered the first time she saw it. Her realtor, claiming she had found the “perfect” place for Sara’s growing company, urged her to look at the space. After five years, BabyBerry had outgrown Sara’s basement and kitchen table, and it was time to find a proper space. The original tenants – Stone & Sons Trunks (for “Ladies Fine Garments”) – had left years ago, and the building had endured several reincarnations after the need for steamer trunks had passed. But on that first day Sara could see the potential and fell in love with the old brick building. She thought it the perfect place for her and her small team to make her now-coveted BabyBerry totes and diaper bags. The then-current tenants were moving out to one of the new industrial parks on the outskirts of town, and so she signed the lease without a second thought. Ten years later, BabyBerry had grown as expected, and Sara had seized the opportunity to buy the building. During that decade, the industrial tone of the area had changed and Sara loved the funky coffee shops, cafes, and boutiques that had sprung up around BabyBerry.
It was Monday. This morning, as they had done for the past 15 years, the BabyBerry team would hold “the Weekly,” where Sara’s 40-person company would look at the production and sales numbers as well as any customer complaints or problems. While the business had always had been profitable, sales had recently flattened. The Monday meetings had become less enjoyable. She took a deep breath and said to no one in particular, “You can do this!”
So begins the story of the fictional business owner in my new book Changing Lanes – The Owner’s Guide to a Successful Exit. The statistics on the number of businesses that change hands each year are murky at best. Some businesses are sold or transferred in formal transactions. But many others just cease to exist. Their assets are simply liquidated and they close their doors, never to be heard from again. Clearly, some of these businesses owe their fate to poor management and competitive markets. But many have owners that no longer choose to work and have not prepared their business to be sold.
At a recent conference of mergers and acquisitions professionals, business brokers and coaches discussed that business sales and transfer activity appear to be up. While there isn’t any single factor responsible for this activity, it’s not difficult to imagine the impact that the “Great Recession” and aging ownership has had. Indeed, a small survey of business owners in my network showed there was a strong desire to sell or transfer their business. But, paradoxically, these same business owners had much less of an interest in what actually makes a business more valuable to sell. Perhaps this is where some of the problem lies – what allows a business owner to make a profit or collect a salary cannot always be easily sold or transferred to someone else. And even if it’s possible to sell, the proceeds may be much less than the business owner had anticipated.
It is estimated that the entire transition process for a business that is actually ready to sell can last anywhere from three to five years. And yet many sellers believe a transaction can take place in less than 12 months. For this reason, regardless of the number of years of business ownership, I now always ask my clients when they plan to sell or transfer their business. I have found that many wait much too long to consider the final disposition of what is often their single largest asset. The sooner business succession is addressed and incorporated into the overall strategy of the business, the better chance to sell the business and for the owner to leave the business on his or her own terms.
Changing Lanes – The Owner’s Guide to a Successful Exit will be released on April 6th on the Amazon platform.