To Sell or Not to Sell
Selling is one of the biggest decisions that you will ever make for your business. A lot is at stake. You've worked for years to build your business. Selling is a way to reap the harvest of all your hard work.
Yet all too often, owners of private companies enter the selling process without proper preparation, unready for the complexity of the logistical and emotional issues they will face.
Which is why asking “Should I sell?” is perhaps the wrong question. It frames the situation incorrectly because it ignores a key factor: You will sell your business sometime.
It might not be this year, it might not be for a long time. But at some point most funeral home owners sell their business, whether it is to family, employees, or an outside buyer.
Thus it’s not a question of if you want to sell, but “How can I control the process?” and “When is the best time to sell?” Whether you think you are close to selling or not, the decision to sell your business should be reviewed periodically.
Controlling the process
There is no "secret formula" that will allow you to glide through a sale with little or no effort. From start to finish, the process of selling a business is detailed and time consuming.
Like other major decisions and undertakings, planning pays. Selling your business requires at least as much planning as other major business decisions you have made.
Successful funeral home sales often start two years before the seller starts looking for a buyer. The seller and the CPA for the business review accounting practices and make changes that will create a history of improved profitability. Your attorneys examine the legal and ownership structure to ensure that you are ready for a smooth transfer of ownership when the time comes.
Selling a business is like being a farmer. You prepare for the moment of harvest, but you don’t control the timing. You wait until the moment is right—the crop is ready, the weather is good, the crew assembled—and you seize the moment.
Conditions in the overall economy, in the funeral home industry, and growth trends in your company are largely out of your control. Yet these factors are vital to a successful sale. Although you can't control them, you can prepare and then watch the external trends. When the conditions are on the upswing, you’ll be ready to seize the opportunity.
Turning to the general economy first, it's not surprising that the best time to consider selling a business is when the economy is doing well, during a period of sustained growth, low unemployment, a positive trade balance and a rising stock market. General economic growth and a robust market for business acquisitions generally track each other.
Similarly, these market perceptions apply to specific industries. When an industry is showing steady growth and the prospects are for this trend to continue, all companies in the industry benefit.
The most vital factor affecting the timing of a sale is the trends for your company. A company that is profitable, growing, and that can show prospects for future growth will be more attractive to a buyer than one that is on a downward slide or that is in trouble.
If you can show that your business is healthy and that it has potential for future growth opportunities, you are selling a positive future and can command a good price. A steady pattern of growth and profits is likely to convince a buyer that these trends will continue. Considering the value of your business well before you intend to sell gives you plenty of time to fix problems so that when it is time to sell you can present a healthy company and good prospects for the future.
When you see that the time is right—the best combination of economic, industry, and business trends—the time to act may be short. Buyers who are prepared can act quickly to find the right buyer and negotiate the best price for their business. Even if selling your business is not an immediate goal, it is worthwhile to periodically examine your business and how the market might perceive its value.
How should you prepare? In the next few pages you'll see how to use the services of an intermediary and how the selling process works.