The Day You Buy a Business is the Day You Should Plan to Sell it……
All too often do I witness a perfectly healthy business, (one in which, a new owner has invested all his/her heart, soul, energy and money), slip away to become a seemly disappointing investment.
Yes…. I think we know about the unexpected causes for a business failure. I call them the 4 D’s »Death »Divorce »Da Bank »DaConomy
Few business owners however, are aware of a much more sinister cause. Unfortunately, and only when it is too late, does the business owner go to the Internet to look for a Broker to help “offload” the business; as I said, unfortunately too late.
Like it or not, most small businesses go through a cycle of 4 Stages:-
The first stage; probably the most exciting, is when the business is a:-
STAR – You’ve just bought a business or built it from the ground up. You can’t wait to open the doors each morning. You are overflowing with fresh ideas that even cause sleepless nights. You have abundant energy and enthusiasm – you wake in the morning before the alarm rings. Customers give you positive feedback; there is liveliness and “personality” in your manner. You even wonder what you were afraid of before you took the plunge, since everything is easier than you had originally expected.
Soon the business becomes your friend and goes to its next stage:-
CASH COW–Your business is beginning to make money; perhaps even exceeding your expectations. Your customers are regularly returning to you. You have a sense of satisfaction each day you carry your takings to the bank. You know in your body that your formula is working. The bank manager acknowledges your daily visits, the bank staff are friendly and respectful and you feel “worthy” in the queue with your bag of takings.
“This is working for me”, you say. “If this continues I’m going to buy that Mercedes I’ve always wanted, maybe some new clothes – I’ve always wanted to live in an up-market address where people won’t look down on me”. And so…. you pamper yourself.
You settle back into the safety of your success, competence and accomplishment. I know you have felt that satisfaction. Yet here, that sinister seed begins to germinate….
PROBLEM CHILD – Things are working and you think nothing needs to change – it’s all good. You relax and feel justified in the money you can now spend in other areas – perhaps even create debt with your bank; I mean why not? Your bank is happy with the way you are travelling! You have kept your head down and eyes on the ball – everything is rosy.
Everything may be rosy whilst looking at the ball. The trouble is that you haven’t seen the goal posts move.
Usually a business owner won’t recognize the beginnings of sleepless nights. Time and again you go to the bank with fewer takings. Your bank manager sees you through his office window but no longer comes to greet you. Some of your favourite customers are not returning. You begin to have staff problems. You worry; you blame the government, the economy; seeking consolation from other operators who are having the same problem. You become less available to your family and friends. You begin to work longer hours, perhaps even letting one or two staff go to cut costs. You cut costs in other areas. You are stressed, and can’t think how to fix the problem. More and more frequently, you receive unfriendly reminders from your creditors.
Before you know it, your business has become a:-
DOG – You have already asked the bank to extend your overdraft; fiddled with your previously successful formula and realized, that you have only but confused your clients, since more and more are staying away. Sleepless nights become “night wanderings”. You have lost weight and now look stressed. You’re no longer as friendly to your clients, who also see your business is not as popular as it was and more continue to stay away. Your landlord won’t extend the lease or reduce the rent for fear he will be stuck with you. You have lost enthusiasm and resent going to work each day. In fact you even resent the existence of your business. Finally you realize you have been too emotionally attached and for the first time you make a common sense “business decision” – you decide to sell.
Guess what…? It’s too late. And there is something else business owners admit to themselves – they should have sold sooner. They should have sold when the business is the most profitable and attractive to a prospective buyer, because that is the only time the owner will get the best price for it.
– Author Peter Troy
Seaboard Business Brokers