WE’VE BEEN GOING over the steps to take and consider when selling your signshop. How about the steps not to take?
Even though you can read a thousand books and think of a million scenarios, some things are bound to go sideways with so many moving parts. Regardless of how prepared I thought I was for this transaction, I still dealt with some pitfalls while narrowly missing others, and because I like you so much, I will share them with you, so you can try to avoid them yourselves!
- Don’t wait too long to have a discussion, if you intend to sell to a family member.
You might have a great succession or exit plan in mind. However, if you don’t act on it or confirm it periodically, you might end up proverbially standing in a game of musical chairs. It might be “understood” that your offspring who work in the business will “take it over some day.” This is not a plan — it is a dream, a nightmare, a delusion, a fiction — until you flesh it out with your kids, spouse, accountant and lawyer. Don’t delay! Get this stuff memorialized on paper with all interested parties on the same page. Even if this won’t occur for years, get the ball rolling now. You’ll be able to have everyone’s expectations out on the table for all to see, question, object to, resolve. Don’t wait until you need double hip and knee replacements and are away for six months to find out that your son (aka “the succession plan”) has recently decided to join a traveling bluegrass band as a roadie and doesn’t really want to be an entrepreneur after all. Bonus: If you plan early enough, you can begin making financial moves to set up the future transaction so it’s not as massive (e.g., begin gifting or transferring stock, addressing any “basis” issues with your ownership).
- If you don’t have a family member or trusted employee to consider selling to, don’t wait too long to consider your other options.
Remember, selling a business isn’t like listing your mother’s fur coat to sell on eBay. It’s a complicated and potentially protracted transaction that takes time. After deciding how to sell (broker, competitor, franchise, etc.), you must assemble all the documentation and take all the actions we discussed in previous columns, which is time-consuming. There is no commitment you must make to just get the process started, and going through these motions will be beneficial to you whether you decide to sell or not. Even if someone tells you the process of selling your business will only take 3-6 months (and I’m sure it’s possible in some rare transactions and idealized world other than the one we live in), don’t believe them. If it only ends up taking that long, then consider yourself lucky!
- Don’t guess how much you think you will need to live once you sell your shop — Know!
If you have a financial advisor (and, as a small business owner, you should have a financial advisor), this is where they start earning their keep. They should ask you questions about your expenses, assets and liabilities and be able to use their fancy software and grim actuarial tables to let you know how much money you will need in order to retire at any particular time, including what you need to sell your business for and when to ideally start your Social Security, if you are old like I am. Once you have a clear idea of what you will need to retire, then you can work backwards to see how much you need to sell your business for. If there is a large delta between what you need and what you can reasonably expect to get, then you still have time to close that difference. You can work to make your business more valuable (see previous columns), or hold off selling your shop until you’ve socked away more money (in regular savings as well as maximizing your 401K or IRA each year), or make a deal to keep working for a salary once you sell, or get a job to work elsewhere. This information is crucial to know as early as possible.
- Be circumspect about whom you confide in.
If you don’t want others to know, then limit who you tell (“three may keep a secret, if two of them are dead”). And don’t necessarily ask for everyone’s opinions. You know what they say about that (opinions are like a part of the body: everyone has one and no one thinks theirs smells bad). Ask trusted peers (not necessarily in your market or city), your paid advisors and affected family members. And keep in mind that not all opinions are created equal.
- Don’t wait to hear back from people, follow up with them.
Having owned and operated your own signshop, you certainly know by now that a voice message or email can go horribly awry (even though they mostly don’t). Don’t stand on ceremony if you are awaiting a response from a potential buyer (or broker, or franchise representative, or lawyer, or accountant, or insurance agent). Reach back out to them, giving them the benefit of the doubt (“I’m guessing my email went into your spam folder and not that you’ve been ignoring me, or giving me a low priority, or avoiding me completely, or disrespecting me”) and confirming they received your message as well as finding out when you can reasonably expect to receive a response.
- Don’t forget to spruce up your financials.
Have I harped on this enough for you all by now? Yes, I think I have.
- Don’t forget to consider how you will let your staff know about the sale.
Have a discussion with the new owner and come to an agreement that you are both comfortable with (or at least both don’t hate), and if possible, bring your team in on the impending changes.
- Don’t forget to remember it’s not your business anymore after the sale, yet it’s still okay to demonstrate “how the magic happens.”
With open and honest communication with the new owner, you can both determine what is needed as far as training and shadowing goes. It can be awkward broaching this — the seller doesn’t want to imply the new owner doesn’t know what to do. However, there is a limited window of time when you can really make a positive contribution to the new owner’s success by offering an opportunity to see how you do what you do. Be brave and offer!
- Don’t neglect thinking about how to inform your clients about the ownership change.
Work with the new owner to sketch out a plan to roll out the new situation in a positive and well-executed manner.
Lest you think I’m making all this up as I go, some of these points were offered by the individual who bought my company. These are real-life scenarios that could have made a more positive impact on the post-sale process, and it’s always easier (and less painful) to learn from other people’s missteps. Do as I say, not as I have done!