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| Brian Wilkins, his wife Heather and an SBA specialist at Riverside Glass Inc. in Findlay, OH (Photo credit: Wikipedia) |
Published: Saturday, May 23, 2015 at 11:54 a.m.
Most business owners are focused on growing sales and profits.
But if they aren’t also looking ahead to how their ownership of that business will eventually end, they could be setting themselves up for failure, regardless of how well their business is doing at the moment.
So says Kevin Manley, a consultant who specializes in helping business owners plan their exit strategy.
At some point, all things end, even for business owners who enjoy what they do with no intentions of ever selling, he said.
That’s because the end can come unexpectedly because of injury or illness, or because of changes in the industry or economy, he said.
It can also come in the form of an unsolicited offer.
Manley said if an owner is not prepared, chances are good the offer might not be as favorable as it should be.
“It puts the buyer in a position of power, which usually results in a much lower sales price,” Manley said. “That’s why it’s better to have an exit strategy and be sell-able where you could say, ‘I’m going to have a controlled auction and you can be a bidder.’ ”
PROFITS versus VALUE
Making a business valuable to a potential buyer is not necessarily the same as being profitable, the owner of Manley Strategic insisted.
“There are many worthless profitable businesses where the owner is the primary salesperson and where a buyer would feel that all of the customers would leave the business if the owner was no longer a part of it,” he said.
Buyers “want to know if the business can still be profitable if the owner steps out, which, by the way, is a great way to run a business anyway,” Manley said. “The owner should not be the central hub.”
Manley said he had clients who were co-owners of a company that was doing well, “but the business itself wasn’t really sell-able. They were too central (to the business) and it was heavily reliant on a single client.”
On the other hand, “they really enjoyed what they were doing and were still fairly young,” he said, adding that he refers to those types of companies as a “lifestyle business,” where it generates enough income to provide the owners with a comfortable living.
Manley’s solution? He said he advised the owners to “keep doing what you’re doing, but take your profits and incubate or buy other companies that could be sell-able.”
NOT A BROKER
Manley said some mistake him for being a business broker whose job is helping clients find buyers.
That’s not what he does, he said.
“It’s not a business broker’s job to say you’re better off waiting two years to make your business even more sell-able,” he said, adding that he, on the other hand, does. “I’m sort of a pre-sale adviser or intermediary who helps business owners three to five years ahead of when they might want to sell their business.”
Manley on Thursday will offer a free seminar for those interested in learning their business’s worth to potential buyers and how to increase that value. The event will be at Oceanside Country Club in Ormond Beach, from 8:30 to 10:30 a.m. For details, visit manleystrategic.com.
Clayton Park can be reached at clayton.park@news-jrnl.com or at 386-681-2470.
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