Is there a "Right" Time to Cash Out?
Betsi Bixby

Should you sell your company today, sometime next year, maybe in five or ten years, or never? Should you stay in? Should you get out while the getting out is good? And more importantly, is there a specific time to sell that would maximize your cash proceeds?

I talked with a marketer who said he could have received $2,000,000 more for his company last year than he likely will now, but his Dad just couldn’t think about parting with the 60+ year old family company when the offer came in. As a result, he feels he missed a “bubble of opportunity” that may not come again. That’s tough as there are family members who needed that extra cash.

To sort out the emotional as well as financial factors in any selling decision, it’s useful to evaluate three factors: market, financial, and personal. Let’s address each in a way that will allow you to evaluate your sell versus stay decision.

Market – What market penetration do you command in your area and how vulnerable are you to price competition?   In our industry, suppliers are forcing minimum volume requirements as well as providing varying levels of promotional support from major to only some to none. What is your status with those suppliers? Next, think about your best customers. Why do they buy from you and is there anything that could cause them to leave you? In other words, how secure are you feeling right now about supply and customers given the marketplace expansion of strong regional players with strong supply economics and low prices?

Financial – From purely a cash flow and pricing perspective, the best time to sell is when you believe your company has almost reached peak growth. I say almost because precisely predicting the exact top is impossible for even the most savvy marketer. Unfortunately, if you wait until gallons or profits begin to decline, you’ve waited too long, so moving too soon is better than too late. Consider the capital required for technology advances needed to stay competitive. For wholesalers, are you willing to invest in tank monitors, computerized trucks and GPS, rack decision software tools, and commit the time and resources to streamline and automate to stay price competitive? Retailers, are you willing to invest in imaging, merchandising, scanning, aggressive price and supply management etc. – all the streamlining and automation needed to drive down operational costs and keep your bottom line healthy and growing?

Personal – The final factor in deciding whether to stay or exit is personal lifestyle and risk. Many marketers realize market and financial factors may clearly indicate a sale, but still experience strong personal apprehension and resistance. Some considerations are:

 Risk Profile – What percent of your total personal assets is your company? And, given that percentage, how risk tolerant are you? If there was a major shift that caused your company to lose value, what impact would that have on you and your family?

 Real Money – Do you see your company’s market value as real money?  How concerned are you with how much real money you put in your pocket when you exit?

Personal Growth – Do you have outside dreams, visions, and aspirations? Or, is playing a role in your company’s future more important than any other outside pursuits? How would you feel about relinquishing control to someone else who might move your company to new heights you chose not to consider? Are all your friendships in the industry?

Changing roles – What role do you play in your company right now. If you sold, how would that change? Are you willing to move to a new role?

As you consider these three main factors, give each a “yes” or “ no” rating. If you are in alignment on all three, the answer to when is the right time is right now. If, however,  you get mixed results, which is usually yes from a market standpoint, yes from a financial standpoint, but no from a personal standpoint, then it could be time to get creative.

For instance, my company’s brokerage division helped several owners recently sell their business while maintaining active roles in the ongoing day to day operations. With more than one, the sales have been so quiet and seamless that the customers are barely aware there is a new entity behind the scenes! 

Selling your company doesn’t always mean divorcing yourself from the industry. Another seller of ours is hugely excited about his company’s new growth potential under the new owner. What had kept this marketer from growing more than he did was the risk he felt using his own personal capital. Now with a larger, well-capitalized company behind him, he can go conquer and build! There are also a bunch of really smart other guys he can talk with about future decisions rather than just his wife in bed at night.

We’ve had several sellers keep family in the business after the sale. One told me he feels an enormous weight lifted off his shoulders with his company converted to cash (about $30 million). His son maintained partial ownership and the company leadership, but my former owner now gets to travel and play more, invest in interesting diverse projects,  and is generally feeling a huge sense of contentment about his life and decision knowing his estate has ample liquidity. When I talk to sellers months down the road after their sale, there seems to be a sense of freedom that comes from their new strong cash position.

As I watch our industry in transition, I see an interesting window of opportunity for those wanting to get out. I also see a window of opportunity for those wanting to grow geographically and drive up value through efficiency. If you need further resources to sort out your buying and selling options, I invite you to visit my confidential website at www.askmeridian.com or call me at 800-728-9005 to discuss your unique “should I sell” situation. We have a track record developing creative, workable timetables for transition.

If you would like a pdf version of this article to share with your employees, please call us at 800-728-9005.

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