Hanging on Too Long
The trap that many business owners fall into is waiting too long before putting their business on the market. Of course, this can be due to bad luck or circumstances that fall outside the control of the business owner. And you simply can’t plan for bad luck when you want to value your business. At the time of writing this article, many business owners are hanging on longer in business because their wealth has been attacked by the global financial crisis and because the economic conditions are weaker than they would like. Also we are living longer and healthier lives. This is double trouble: they are making less income and the business is worth less than they had planned it to be. A lot of business owners treat their business as their superannuation and have poured so much of their income back into it, either to keep it afloat or to grow it and boost its value. They hope that things will turn around. So what is the solution?
Value your Business: – It would be good if a business owner knew what their business was worth and what it was likely to be worth in say 1 to 3 years time. Then the decision as to whether to sell or hang on comes into sharper focus and the value of the alternatives can be more accurately weighed.
Selling in Bad Times: – If a business owner is getting to the point where they can no longer add value to the business or the business is going backwards, there is absolutely no point in hanging on and the only result can be diminishing value over time. Sale of all or part of the business would appear to be the best option.
Selling in Good Times: – Often a business owner hangs on because they think the good times will last forever. The well-known maxim “nothing lasts forever” applies here and the business owner should not believe the headlines that tell you that the boom will last longer than all other booms.
What are the symptoms of hanging on too long?
- not enjoying the business anymore
- diminishing profits for no real reason
- competitors getting smarter
- feeling swamped by technology and innovation
- people ringing you saying “you still in business?”
Always be asking yourself in business whether it’s time to get out. I’m reminded of a Mother’s Day sign in New York which I have reproduced below. Your mother might be saying the same thing about you being in a business that you don’t enjoy.
Tony Arena
Owner @ BCI Business Brokers, 30 years of experience in selling businesses
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