Time to Sell? 5 Tips for a Smart Exit Strategy

Rob O'Regan -- Expert Business Source, 1/9/2007 1:33:00 PM

Burnt out? Looking for a lifestyle change? Maybe it’s time to sell your business. Done right, a sale can be a rewarding experience, both emotionally and economically. Done poorly, a sale can leave a bad taste in your mouth – and money on the table.

With the housing market in flux, a business owner may be hesitant to put a for sale sign on his company. But the reality is that savvy buyers are out there, looking for good deals in the construction sector in anticipation of the next upswing, says John Dorey, a senior managing director with RSM EquiCo, an investment banking firm in Costa Mesa, Calif.

“Companies that are doing fairly well, have weathered the last year, and have a backlog are prime candidates for [private equity] rollups and for others in the industry looking to buy,” says Dorey, who heads up EquiCo’s Specialty Construction Division.

Dorey offers the following tips for prospective sellers:

• It’s not all about the money.
  Business owners want to get the most out of a sale, particularly in family-owned businesses where sensitivities around equitable payouts can run high. But for owners seeking a buyer who will carry on their legacy or maintain the existing culture, getting maximum value must be balanced against finding the right fit.

• Measure your intangibles.
  Establishing market value for your business involves more than just looking at your balance sheet. Prospective buyers will look at the intangibles: How seasoned is your management team? How skilled are your employees? Do you have a specialty that distinguishes you from the competition? You need to account for those intangibles in your valuation.

• Cast a wide net.
  Don’t limit your search for potential buyers to direct competitors or local companies. Dorey recommends looking outside of your main area of operations, both geographically and functionally. “Think about companies in contiguous cities or states that may want to be in your area,” he says. “Look at what you do that would be a good add-on [to their services] – a benefit they can buy and don’t have to create.”

• Reverse engineer.
  Put yourself in the buyer’s position and think about what type of company would benefit the most from owning your company. “Look at your strengths and weaknesses, how a buyer would perceive them, and how would they benefit from them,” Dorey explains.

• Hire a professional.
  No surprise that an investment banker like Dorey would advise sellers not to go it alone. But his argument is valid: Selling a business is a complex transaction that requires assistance from expert advisors who can research the market, establish goals for a sale price, and find the best buyer. An investment banker can help you place your company in the best light for buyers – and increase your chances for a satisfying exit.

Rob O’Regan is a freelance writer based in Londonderry, NH.