It’s Never Too Early to Fix Your Company
By Jack Lyons, CEPA
President, Lyons Solutions LLC
This may be the most important article I’ve ever written. It comes from evidence gathered over a twenty-five year period from talking to thousands of business owners.
Throughout my life, I’ve been advised, “It’s never too late to do this or do that.” For many years, I thought this was good advice. In my business I constantly speak with business owners about their personal and business goals and whether or not they and their companies are ready to sell, if their companies are saleable, what valuation they might receive if they were to sell today, how a buyer would look at the way the company conducts its business, and how the company can be improved, etc.
I’ve got some startling news for you. “It’s never too early to fix your company and the sooner you do it, the better off you, your company, your employees, your customers and your vendors will be.”
I don’t know about you, but I’m totally convinced that we’d all be better off if we act now rather than wait until a later date to take action to fix any problems that come to our attention. People are tremendous procrastinators, harboring an attitude of “I’ll get to this later.” or “I’ll get to this tomorrow.” Unfortunately, this often ends up meaning “I won’t get done until the pain is so intense that I have to do this now.” That by definition means we are stuck with what we have because we’re either too busy, too afraid, too lazy, too comfortable, too apathetic, or too something else, all of which keeps us from doing what we should have done long ago.
Believe it or not, studies have shown that 94% of all companies and a majority of mid-sized companies are not saleable. That’s right, 94%. They can’t be sold; they just go away at some point in time because the owner either dies or walks away from the business, or the business goes bankrupt.
Now, I know you probably believe that your business isn’t part of that 94%, and maybe it’s not. Maybe you’ve done enough things right to make your business saleable. I hope you have. But the real problem may be far more complex than just if your business can be sold. Other issues are also important, such as:
- Is it saleable right now? If a good buyer came along would they be compelled to buy your business because it is attractive to buy today?
- Is it saleable to a broad audience of buyers so that you’ll have some choice who to sell to?
- Will the valuation you receive if you sell your company now support your post-sale lifestyle financial requirements?
- Is the company positioned to get good terms if you were to sell it today, or would you be at the mercy of performing in the future in order to get paid?
- If you were to sell it now, could you go off into the sunset to do something else shortly after selling or will you have to work for the buyers for some number of years because you’re such a vital part of the company that it would fail without your stewardship?
As exit planners, we analyze a company and prepare the owner to take steps that result in positive answers to these questions. In the more than twenty five years I’ve been in the M&A business, I’ve seen only a few companies that are ready to sell at the time they want to. That makes me believe in the 94% statistic noted above. But what if every owner’s attitude was “It’s not too early to fix my company to get it ready to sell, so if a good buyer shows up tomorrow, I’ll be ready.” Wouldn’t that make a big difference in that disturbing statistic?
An unbelievable number of business owners have said to me something like “I’d like to sell, but…” I’d like to make a few suggestions to these companies:
- It’s not too early to clean up your income statement.
- It’s not too early to clean up your balance sheet.
- It’s not too early to clean up your organization.
- It’s not too early to clean up your inventory.
- It’s not too early to clean up your legal affairs.
- It’s not too early to clean up and diversify your customer base.
- It’s not too early to have a succession plan.
- It’s not too early to get your company on a growth path.
- It’s not too early to clean up your leases.
- It’s not too early to get out of debt.
- It’s not too early to maximize your profitability.
- It’s not too early to focus on fewer business segments.
- It’s not too early to have a strategic plan.
- It’s not too early to have audited financial statements.
- It’s not too early to clean up your employment agreements.
- It’s not too early to treat your business like your most valuable wealth creation asset.
The best advice I could give any business owner that might want to sell his or her business someday is to have “It’s not too early to fix my company, my income statement and my balance sheet” posted in plain sight in their office or on their desk. Pick one item off of this list and put it on your To-Do list for the month. If you persist in this, by next year your company will certainly be a better company than it was a year ago and very likely part of that 6% of companies that are saleable, especially if you have a succession plan and the company is not doomed to fail without your stewardship. You’ll be in a stronger position to receive a higher value for your business when it is time to sell and be prepared for sale when a great selling opportunity occurs.
If you’d like to discuss how to make your company more saleable, call Jack Lyons at (941) 497-4700.
© Copyright 2011 Jack Lyons. All Rights Reserved.