Profitability is important in valuing your business. But that’s not the only position of value to consider as you think about selling.
You may hear that if your company isn’t profitable you have nothing to sell. Not always true. In 1993 I sold a management training firm that I had started three years earlier. The company was just building name recognition and had achieved marginal profitability when my husband’s multiple sclerosis forced him into early retirement at 44 years old. We decided the best option for the family was for me to sell the business and take a corporate position that would provide more security (health insurance) with less risk for the family.
It was a traumatic time. I gained weight as I ate my way through hours of ‘coming to grips’ with the decision. The business was serving the needs of the business community. Three years of hard work were starting to provide the payback I had worked so hard to achieve. Now, I was thinking of closing the doors. That was the advice of a CPA who said the firm wasn’t profitable enough to get an interested buyer.
At first I took that advice as gospel. Then I started thinking about the companies we had been serving and thought someone must see the gains we had made over the three years, with companies returning to buy additional services.
I decided to build a history of the firm, showing profit and loss statements with a trend of increasing revenue. Following that, I built a spreadsheet that listed each customer. After each company I included the invoices, dates, and dollars spent with us to show repeat business from satisfied customers.
It’s interesting, as the owner I knew this was taking place but I had never compiled the data in this way before. Now I had a positive financial trend with repeat customers to share with potential buyers. It was starting to look like we had something to sell.
I didn’t stop there. In the files we had kept notes from customers. Some had written comments of appreciation on the surveys that were sent with each product or service. Some were unsolicted notes from individuals we had worked with who just wanted to say ‘thank you’ for helping them find the best training book, video, or speaker to fit their training need.
The final step was gathering marketing pieces we had developed, newsletters, magazine articles written about us, and training material we helped companies to create. Contracts with trainers & suppliers were added to round out all of the important business documents.
A three-ring binder was put together, creating an impressive picture of what we had to offer a buyer.
At that point I started making phone calls to companies that might be interested in buying the firm. Within six weeks I had three interested parties, one of which owned grocery stores. They bought the firm. A rather unusual buyer you are probably thinking. They had two reasons. They wanted to increase the employee training within their stores and owning the firm would make that more cost effective. The other reason was that one of the owners wanted to create and sell her own workshops, something we outsourced to professional speakers and trainers.
The company I sold was called An Open Mind Company and I recommend you keep an open mind when you plan for the sale of your firm.