1Planning to Sell
Putting the Horse in Front of the Cart
America has hunkered down. People have cut back wherever they can. Folks are brown-bagging lunch—if they still have a job. Theyre cutting their own lawns and one anothers hair. Families take in-home “staycations” instead of trips to Disneyland.
Your moment has arrived.
You may have always wanted to start your own company. You may have just gotten fired and have no other choice but to go into business for yourself. You may have a business that isnt growing and needs fixing.
Perfect timing.
Building and selling your own business has always been one of the greatest paths to wealth. Now its the opportunity of a lifetime. This is the best time in decades to plunge in. As the economy revives there will be pent-up demand for what businesses have to sell. Better still, people with briefcases full of money will be clamoring to buy those businesses.
But its not enough to build your business now and worry about selling it later. From day one, you need to know what buyers want to buy and then create it. You shouldnt knock yourself out for years building a business only to discover you cant sell it. Planning to sell—from that very first day—is putting the horse in front of the cart.
The Coming Boom:
Making Your Fortune in Business
The next big thing in business is starting your own company, building it up, and selling it for a bundle. When real estate crumbled in the early 1990s, investors ultimately turned to technology companies and created the dot-com boom. When that boom went crash, investors renewed their love affair with real estate—and thus was born condomania. It felt like there were more construction cranes in Miami and Las Vegas than tourists. Now stocks and real estate have plunged once again. Battered investors are not about to fall madly in love with either of them for a while. Personally, Id rule out comic books, baseball cards, and Beanie Babies, too.
Making money the old-fashioned way, by starting a business, growing it like crazy, and then cashing out, is about to come back into style.
If youre wondering if the timing is right, consider this: At this writing we are in the worst recession since the Great Depression. Throughout history, though, some of the most successful businesses were created in the most difficult of times. General Electric was formed by Thomas Edison during the six-year recession called the Panic of 1873. Disney began business in the recession of 1923- 24. Hewlett-Packard was started at the end of the Great Depression. It only stands to reason that a company that succeeds in dire circumstances—when so many others fail—will thrive in normal times and excel in boom times.
Now consider the buyers of businesses. In recessions, they conserve cash and maybe even run out of it. Certainly they get cautious. So they slow down and even stop buying businesses. Coming out of a recession, theyre looking for steals. They start buying companies again—but just the best businesses and only at bargain prices. Buyers make a killing off those early deals. Then, pumped up by those lucrative returns, they broadcast their success to attract acclaim and investors. Thus the gold rush begins. Other buyers stampede onto the scene, looking to strike it rich buying companies.
The business sales in the next few years will bring on a mad dash of buyers and deals that get better and better for sellers. If you start now, youll be in a position to sell at an extraordinary time.
Planning to Sell
Planning to sell is all about building—from the very start—a business that people want to buy. The folks who purchase companies dont want a business where every customer asks for you and youre long gone. They certainly dont want a business that, as harsh as it sounds, dies with you. They want an enduring institution, a reliable moneymaking machine that will grow and last.
Of course, you dont need to build up your business or sell it. You can run your business so that it meets your everyday desires, whether that means golf every afternoon and poker every night or just enough money for Cheez-Its, lottery tickets, and cable television. They even have a name for that type of business—a “lifestyle business,” because it prioritizes your lifestyle over your company. You can run your business like a hobby. You can live a decent life as chief bottle washer and cook. You can even put a bullet in your business when you retire. Life is full of choices.
But to get all of the possible value out of your business—to increase the chance youll achieve enormous wealth—you need to build something that you can sell. You need to create something that buyers compete to buy.
Buyers look for a lot of things, but at the very top of the list are the following:
PROFITABILITY: A business that consistently makes money. Ideally your profits increase every year.
COMPETITIVE EDGE: A business that beats the competition. Face it: once youre making money, youll attract rivals. Buyers want to make sure that competitors cant duplicate your success or cut into your profits.
SCALABILITY: A business that can grow bigger. Buyers want to increase the size, revenues, and profits of your company. The decisions you make from the outset, from how you form your company, to the equipment you buy, to the brand you establish, all affect “scalability”—the future ability to grow your business. If you want to sell for big bucks, you need a company that can get big.
SUSTAINABILITY: A business that can make it through adversity. You may not have enough capital. You may not back up your computers. You may not even have employees who can do your job if you get sick. But if your company cant withstand a few disasters, youll never be in a position to survive, much less sell. Buyers dont want a company that tumbles like a house of cards in the first heavy breeze. Theyre only going to pay a lot if youve built a company that can make it through tough times.
Theres more. Theres picking the right legal structure for your business, creating financial systems so you can manage your business, avoiding unnecessary risks, preparing good contracts, marketing, government relations—and more. Theres learning the way businesses are sold, how to assemble the deal team to sell your company, and how to negotiate the sale itself—and more.
Building a business, overcoming problems, and selling your company present countless challenges. But you dont have to do it the hard way.
The Easy Hard Way
Ive seen sweat on the foreheads of great business leaders struggling with momentous decisions. Ive sat in thousands of boardrooms and business meetings where entrepreneurs agonized over issues that would determine the fate of their companies. Ive seen their responses yield victories and defeats. In the lessons that follow, youll see and learn from their successes and failures.
With the guidance in this book you can learn how to build a business that sells. This is the insiders guide to what works and what doesnt—what you need and what you need to avoid. Selling a business can be hard. But its not hard to sell a good business.
Excerpted from How to Build a Business and Sell It for Millions by .
Copyright © 2010 by Jack Garson.
Published in March 2010 by St. Martins Press.
All rights reserved. This work is protected under copyright laws and reproduction is strictly prohibited. Permission to reproduce the material in any manner or medium must be secured from the Publisher.