In 2008 I took a break from running my four companies. My wife and I went on a six-month sabbatical, travelling from Ontario through 13 states and nine provinces.
It was one of the most enjoyable and satisfying things we’ve ever done, and I’d recommend it to all business owners. I’ll admit I did a little work along the way: I had scheduled meetings with entrepreneurs who had recently sold their businesses throughout the trip, so I was able to gather some great stories!
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One example stood out. Scott had a profitable insurance agency in Texas generating about $8 million per year. He sold the company twice.
The first time around, a consortium that was buying up smaller agencies purchased Scott’s firm. Eventually the buyer lost interest in the acquisition and stopped making payments. Thanks to Scott’s tight acquisition agreement, he was able to take the business back even though the buyer had paid 80% of the price. Back in charge, he sold it again for even more than the previous deal.
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Scott did very well financially thanks to the back-to-back deals. Unfortunately, this commercial success cost him his marriage and seriously damaged relations with his kids. It was a difficult and intense time.
I wanted to know how he had managed to sell his business successfully. Scott articulated four common tactics I heard in many of my interviews:
1. Get a coach
“Anybody who doesn’t is a fool,” Scott says bluntly. “It’s worth millions!”
Scott says the outside consultant he hired was invaluable. “He was willing to call bullshit,” he recalls. “He kept me objective and on track in spite of distractions. I was also part of a CEO peer group and I learned a lot from those meetings.”
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2. Turn everything into a process
Document every action and decision you and your employees make, then refine those rules and follow them.
“I had my employees write out processes for everything,” Scott says. “We had best practices for how to start the day, how to clean the washrooms, how to deal with customer complaints and how to make sales—everything.”
The move allowed him to weather employee absences and streamlined his business. Presentation made a difference too. “Those processes were documented in a neat row of binders,” Scott says. “When the prospective owner saw the binders and saw that my employees were actually following them, that nearly sealed the deal right there.
“Knowing that someone new could come in and follow the processes and get up to speed quickly nearly doubled the offer. It minimized the risk if employees left.”
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3. Be honest with your employees
Let them know the plan and engage them in achieving the goals. “We were always open to being purchased and the employees knew it,” Scott says.
To prevent the possibility of an exit from hurting productivity, it’s important to offer your employees rewards for success and let them participate in the windfall. “To keep them motivated, we held ongoing training, set clear goals and paid bonuses based on growth,” Scott explains. “When we sold the company I paid out over $300,000 to my 40 employees.”
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4. Always be prepared to exit
While being acquired might not be top of mind at the moment, it’s important to plan for the possibility of selling your business. That way, when a juicy offer turns your head, you’re ready to respond.
“The thing is, you never know when someone might show up with an offer,” Scott cautions. “I didn’t seek out either of my buyers. They found me. But I was always running the business with the intent to sell it.”
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• • • • •
While selling a business is a new experience for most owners, other entrepreneurs have demonstrated how to do it well. You should learn from their experiences to maximize your chances of success. Unlike Scott, you may not have a second chance to get it right.
Wayne Vanwyck is the founder and CEO of The Achievement Centre International in London, Ont. He is the creator of The Business Transition Coach Forum and the author of the best-selling books,Pure Selling and The Business Transition Crisis. He has been training and coaching business owners for the past 30 years.