The Business Transition Blog

Do you want to sell your business for a dollar?

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.