The sale of your company is the most important transaction you ever undertake. With the right guidance, you’ll get through it successfully.
Be Prepared. Boy Scouts live by this motto. So should you. It’s the best way to run your business and the only way to ensure you receive top value for your company. Prepare for exit from day one and run your business every day as if you might sell it tomorrow. You’ll accomplish your business objectives and position your company for maximum value. Meticulously maintain company records. Keep business data current and accessible. Review data and systems periodically to ensure compliance, with company policy and financial reporting standards. Invest in accounting and customer service systems. Most importantly, premise daily business decisions on what’s best in the long run, not what’s expedient in the short term.
Should I Stay or Should I Go? As with many things in life, timing is everything. Deciding to sell depends on two questions. Do you want to sell? This may require decisions by you and others in your company, and your family in a family-owned business. If yes, then consider the economic question: Does it makes sense to sell? For example, if you reinvest all your recurring revenue into the business, it may make economic sense to sell your company, particularly if you can earn as much in salary working for the acquirer. You could invest the proceeds of your sale and continue to earn as much as an employee as you did as an entrepreneur. While many owners and operators are good at selling or installing systems, they lack capital, business acumen, or both, to accomplish significant growth over the long term.
Commitment is Key. Seeing the sale of your company through to closing requires a significant legal and economic commitment. Most entrepreneurs take a great deal of pride in what they’ve created. Some feel a strong personal bond with their customers and employees. The sale of a company follows a specific process, which takes on a life of its own. Once you’ve made the decision to sell, maintain your commitment to the deal, trust the process and see it through to the end.
Knowledge is Power. The party that knows the most and best understands the target’s operating metrics is in the best position to maximize the company’s value, either by seller on exit or buyer in integrating the target. You may know how to run your company on a daily basis but do you know everything you need to know to sell your business? Find out what you need to know before you market your company to potential buyers. Seller-initiated due diligence leads to the early and favorable resolution of issues. Retain an industry consultant to analyze your account base thoroughly, so you know what you have to sell and can sell what you have, not what you hoped you had. The expense associated with these efforts pays ample dividends in the long run, because buyers, like everyone else, don’t like sellers who over promise and under deliver.
Retain Competent Professionals. Your local attorney may be a competent general business or family lawyer, but how many alarm companies have they purchased or sold? Do they understand the intricacies of a performance guarantee and the account-related representations and warranties? If not, do you want to pay an hourly rate so they can attempt to learn some of the issues while on the job? Without industry experience, sellers’ counsel often misses important issues, leaving their clients’ money on the table and exposing them to unnecessary liability. The same holds true for other professional advisors. As the saying goes, you get what you pay for in life. Or, if you prefer, you have to spend money to make money.
Eric Pritchard, SD&I’s legal columnist, is a partner in Kleinbard Bell & Brecker LLP, Philadelphia, a commercial law firm with a national practice in the electronic security and life safety industries.