It’s Your Legacy
The Business Transition Blog
Over the next few weeks I’ll be sharing some ideas on taking a sabbatical. I took one a couple years ago and I would highly recommend it! But YOU need to know why you want it, plan for it, and then take a leap of faith.
First you need to have put processes and procedures in place and measured and improved upon that over time. I’ll talk more about that later. But once completed, you should test the waters to see how well you’ve done. Do you have the right people in the right roles? Have you mentored and coached them sufficiently? Are they adequately trained to do their jobs? Do the company’s processes run the company or is it run by the well intentioned but unpredictable whims of the managers and employees? Can you take a vacation without checking in every day? Do you take your BlackBerry with you everywhere you go? Are you mentally ready to begin the process of letting go?
I had some of these issues thrust upon me prematurely. I have a degenerative muscle disease, which doctors think is adult onset spinal muscular atrophy. In my case, it’s attacking the quadriceps – those big bulky muscles in the upper legs. Well, mine used to big and bulky, but now they’re not. They are almost gone.
I’ve lived with it for over ten years. It is a syndrome that progresses slowly and there is no cure at this time. On a practical level, it means that I tire easily, have trouble with stairs, stumble or fall on uneven ground, and cannot participate in many of the sports I enjoyed when I was younger. I often use a cane for balance and the prognosis is that someday I may need a wheelchair. I am doing everything I can to put that off as long as possible.
I consider this disease to be both a blessing and a curse. The curse part is obvious. It’s painful, frustrating, and sometimes discouraging. The blessing is that it was a wakeup call for me. Like many entrepreneurs, I had always considered myself invulnerable, forever young, and capable of anything I put my mind to. I was fearless, optimistic, and the future was always bright and beautiful. In fact, the future was so bright and beautiful, I spent a lot of my time there.
I was forever envisioning how great it would be when my company and I finally broke through to the other side – the huge number of people we’d help, our modest but still significant impact on the world, the financial reward… I have always enjoyed what I do, but when I was honest with myself, I had to admit I didn’t spend enough time in the Here and Now. I worked my butt off for the rewards waiting for me in the future, always just around the next corner or bend in the road.
After a few years of denial, my disease forced me to slow down, appreciate the present, and acknowledge that there are things that are important to do now because I may not have a chance to do them in the future. I then realized that many people don’t get that message until it is too late. “I’ll take that trip I’ve always dreamed of when I retire,” they say, only to drop dead of a heart attack before they get around to it. I won’t go so far as to say I’m thankful for my disease, but I know it could have been a lot worse — I have had the opportunity to do some things I would have otherwise put off. And for that, I am grateful.
Stay tuned for more…
In the village of Floradale, just north of Waterloo, a family business is closing. After nearly five decades, the three sons of the original owner are auctioning the equipment, the tools, and the property because no one is interested in buying their business as a going concern. Even with 1600 regular customers, they couldn’t find a buyer and they found the process of trying to value the business and sell the shares too daunting a task. “It just proved too complicated to split it up when we don’t know the property value,” said the elder brother, quoted in The Observer, a local newspaper.
This is a scenario I predict will be repeated hundreds of thousands of times throughout North America over the next ten years.
It’s too bad they hadn’t read my book earlier, but I suspect their minds were made up before my book was published. That’s my fault for not getting it out there earlier and I am concerned about the business owners who make these kinds of decisions in isolation without considering their alternatives early enough to make a difference.
In hindsight, there are a number of actions they could have taken that might have made a difference. For example:
- Bring on an apprentice with the potential to take over the business and buy it as a going concern.
- Speak to a business broker who could have looked for a buyer.
- Engage a coach who could have helped guide them in preparing their business for sale and consider their options earlier.
- Take their success formula in this business and buy others that could have benefited from their process, thus increasing the overall size of their business to make it more attractive to potential buyers.
Maybe they considered and rejected these ideas for their own reasons. Perhaps in the end they may have come up with the same answer. It’s part of the problem in owning a small, independent business with the owner(s) so tightly tied to the ongoing success of the company. It’s hard to sell because what they are trying to sell is a job, not a business. To sell a business you need to first build a business and that needs to start at least three to five years before you want to sell it.
The market is a little confused at the moment. On the one hand there are millions of baby boomer business owners (let’s call them BBBOs) who are thinking about exiting their businesses. The stats are irrefutable. They are going to sell their businesses in the next few years, die with their boots on, or close the doors and walk away. On the other hand I’ve talked with business brokers who say there is a lot of money waiting to be used to purchase businesses, but a dearth of businesses for sale. What’s up?
Undoubtedly the recession caused many owners to rethink their timeline and probably put the sale of their business on the back burner for two or three years. So the inevitable will still happen, but it’s been pushed out further in the future. So if you want to beat the rush, now might be a good time to sell your business.
But what if this is a good time, but your business isn’t ready for sale? What if you don’t have your affairs in order; the books in good shape; the inventory reduced; the right people in the right roles; the sales trend going up; the profit picture rosy; the policies and procedures in place and documented? Then you have a choice between selling for less than what you think the business is or could be worth once you’ve done prepping it for sale, or competing with many other businesses that will be coming on the market, ready or not. Tough choices.
I had dinner with an old friend Jim Estill recently. Jim is the founder of EMJ Data Systems. He grew that business to $350 million and sold it to Synnex Canada. Then, as the president of Synnex Canada he more than doubled the value of that business in five years. Jim’s a smart, successful businessman. He recounted that one of his strategies for growing EMJ was to find companies in his sector that were in trouble and buy them for a dollar to take them off the hands of the owners. “They would have inventory they couldn’t sell, big debts, and the owners just lost the will to go on,” he said. “They were happy to get rid of it. And I could sell their inventory through my distribution channel, cut overhead in ways they weren’t prepared to do and make it profitable.” While he was doing them a favour, taking the problem off their hands, I couldn’t help thinking that the owners of those companies he bought must have felt broken and defeated as they signed the shares over to Jim. I’m sure it wasn’t the vision they had when they started their business years earlier and put their heart and soul into it.
We both agreed that there will be many more companies for sale for a dollar in the next few years. It’s a great time to be a buyer with some capital behind you.