Are you thinking about selling your business? If so, there’s a good chance that you’re feeling overwhelmed and a little uncertain about how to get started? That’s how many entrepreneurs in your situation feel. John Couzens, Managing Partner with Trinity Capital Services, LLC shares his expertise with American Entrepreneurship readers in this exclusive expert interview.

Q: What factors need to be considered when deciding whether or not to sell your business?

Couzens: There are three primary factors to consider:

1. Sustainability – The ability of a business to endure and compete in the future.
• Willingness to accept new risks
• Management depth to battle increasing competition
• Personal energy to manage through the next business downturn

2. Financial independence – The ability of the sale proceeds to achieve personal financial goals. Get really clear on “your number”: the sale price you must obtain to achieve personal financial goals.

3. Business cycle timing – Valuation multiples drop sharply when the economy is down and jump back only when the economy improves. Additionally, business profits drop in recessions, and valuation multiples are based on business profits. Selling a business in a bad economy is doubly painful: lower multiples AND lower earnings. The best time to sell is when the future looks most promising.

Q: What are the common pitfalls associated with selling a business that entrepreneurs need to avoid?

Couzens:

  • Failing to learn about the process of selling businesses, and what it means to commit to an exit strategy.
  • Procrastinating on developing a when-to-sell decision matrix that identifies signposts for the business.
  • Underestimating the discipline necessary to maintain confidentiality about exploring exit strategies.
  • Selecting advisors based on personal relationships vs. on expertise in mergers and acquisitions
  • Lacking emotional courage to close the deal and pick up the check. Many business owners wrap their personal identities in their companies.

Q: How can a small business owner decide if it’s a good time to sell his or her business?

Couzens: A decision matrix of priorities within a list of typical signposts will tell you if it is a good time to sell.

  • Capital needed to compete
  • Management depth and succession
  • Economic outlook and business cycle
  • Competitive landscape
  • Business sustainability
  • Investment diversification
  • Liquidity
  • Shareholder alignment

For example, a 65-year-old business owner may decide to initiate the sale process if there is a gap in management to navigate through the next downturn – and s/he doesn’t want to take on the multi-year time commitment and increased payroll to recruit, groom and develop a new management team.

Q. What are the steps in developing a transaction plan in preparation for selling a company?

Couzens:

  • Get an education in the sale process and typical exit strategy alternatives (strategic buyers, financial buyers, management buyouts, recapitalizations, Employee Stock Ownership Plans).
  • Get really clear on “your number.”
  • Develop a decision matrix and signposts to tell you when to initiate the process.
  • Assemble your team of experts.
  • Run your business and do not let the sale process interfere with producing strong operating results each month. The biggest threat to a successful sale is when sellers take their eyes off the ball and the business results deteriorate.

Q: Is it a good idea to try to sell your business yourself, or is it advisable to seek outside help?

Couzens: Trying to sell your company without an advisory team is a little like expecting a dentist to install a pacemaker. Most successful sale transactions require special expertise to create a competitive market with qualified buyers on a confidential basis, and to negotiate deal terms with buyers who are professional acquirers and experts at buying businesses on the most favorable terms possible (for them).