Selling Your Business – Harnessing the Recovery

January 29, 2011 by  Filed under: Marketing 

Economic recovery could lead to a significant increase in the value of your company.

We’ve been through tough market conditions. How do you see the recovery affecting prospects and prices for selling businesses?

Recovery is an interesting time. I have an example of someone who was going to go sell in the last upturn and I advised him to stay. His business had bottomed out and it was pulling back up.

He was now back to earning a million dollars in EBIDTA and he had dropped down well below that.

He wanted a price and my advice to him was to hold for a year and the multiple would go up. Nobody was going to believe a six-month set of numbers but 18 months, yes, they’ll buy that. His multiple went up almost two multiples.

Few people get into that situation where they’re that lucky; but it was essentially planning for his business growth, market growth and, yes, he was ready to sell. He had reached an age. He had had enough.

All of us that operated during the down cycle, you could get a belly full of it in a hurry; but we laid out that plan for him and, when it worked, he was delighted.

I’ve helped with a number of these. That’s the way you deal with the upside. You look at the market. You look at realistically where the multiple is, where the cash flow is today; forecast where it will be in 12 months, not that any of us have a crystal ball.

Then look to see whether it’s worth your time to hold it and when we’re dealing with an up cycle that’s the case.

If it’s growing that means the market multiples are growing. You’ll get a greater multiple for your business than you would by selling it now. So market timing is an important thing to consider on that up cycle.

That’s tough to time.

It’s tough to time. These people who sell at a peak, they just got lucky. You don’t want to focus on selling at the high point of the market because the risk of missing it is just all together too high. You want to sell when the market is on a growth cycle.

So in this guy’s case, a buyer came in after he had taken the business to $2 million in EBIDTA. They could see where they were going to go right away and add another million dollars in the next 12 months. And he sold it to them just as happy as could be, and they have the business and they’re happy with it.

There was some foreseeable future where this business was going to continue to improve.

Recovery is there. At that point, good managers have finished their cost cutting, they’ve improved productivity, they’ve done those things that need to be done; they’ve improved their intellectual capital in the business.

The business is really primed to move forward. In that recovery period it’s really time to step on the gas. It’s time to step on the gas a little bit before others do.

You have to plan the business timing, the market planning, you have to prepare that business for sale and it takes a good deal of time to do that. You have to really prepare yourself for what you’re going to do when the business is sold.

For twenty-five years, Marian Cook has been a trusted advisor to the hundreds of owners and executives worldwide whom she has helped to improve business performance and value. She has worked globally with firms ranging in size from start-ups to Fortune 500 companies. She has helped them develop and execute their strategies, realize their goals, and maximize their businesses’ valuations and their transitions to new ownership.

For more information on selling a business; well as the interviews of 15 world class experts, such as Richard Trottier – author and President of Sundial Partners – a private investment banking firm, please visit our Business Transition Experts “Education at Your Desktop” site at: http://www.businesstransitionexperts.com/telesummit.

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