The short answer to this question is that it will take longer than you think. There are some factors that will make a difference in terms of timing, but the actual selling process is really the end of a process that should have started the day you started your company!
If you follow owners of companies with revenues of a few million to tens of millions of dollars you will learn that they spend a lot of quality time thinking about their “Long Game”. This is true of those that have successfully sold their business(es), especially some of those “serial” entrepreneurs who start companies, grow them to a certain size and then sell them.
The Long Game
Before you started your business (or bought or inherited one) you made a decision to be in the landscaping business. You decided what that meant for you and your company. You set a vision for the customers you wanted to have, your team members, your services, and your overall culture and processes. Hopefully, you are able to return to that long-term visioning/planning at least once a year and refresh your vision. Ideally, you would follow on to that with your senior leaders and use it as the basis for your planning.
Your planning will cascade from the
- Vision-Long Term Goals to the
- Strategic Plan (3 years or longer) to the
- Annual Plan (the tactical plan)
As a part of the Long Game, you know your ultimate goal is to transition the company to new ownership (whether internal including family and/or management or external to strategic or financial buyer). You’ve identified a window of time and circumstances when you’d like this to happen. You’ve been working to optimize all the factors that a buyer will want/need to have in your company to make it successful and profitable.
Is Now the Time? MARKET VALUATION
We recommend you always have a sense of the price range for your company based on a fairly recent market valuation for the company. Because a part of our process is to identify your company’s strengths and weaknesses in relation to your marketability, this valuation will give you feedback of potential action items. Your price range will be tied to those strengths and weaknesses. For example, if you have a strong General Manager running the company who would stay after you sell, that would be a plus for a strategic buyer who is looking to add a company in your area to gain market presence. Should you sell without that position being filled? That would depend on your other strengths and weaknesses and the potential buyers. But if it will diminish your ultimate price too much, you might want to prioritize getting that key person in place and have a track record for them before selling. Similarly, if your gross profit margin is off, or other client factors are in play, you want to assess the impact as you consider your timing for selling.
Time to Sell – THE DECISION TO SELL
Now that you have an estimate of your company’s market value, it is crucial that you find out what your NET AFTER-TAX proceeds will be if you are able to sell for that price and those terms. Think of this like selling a house. There is a price that your house would sell for, but once you get to the closing table, there is a big difference between that price and the net dollars that you end up with. There may be strategies you could use to minimize your tax burden and those may take time too. If you like the results and want to move forward, now is the time we would “start the clock” on the actual time to sell.
Time to Sell- SELLING THE BUSINESS
If you have an aggressive buyer in the wings who wants to buy your company and is in the right ballpark pricewise, the shortest time frame to expect would be 3-4 months. In most other cases, the process from the decision to sell to closing will take 12- 18 months. This assumes you have a letter of intent at least six months prior to the closing date. Regardless, these projects take a serious commitment of resources and attention and benefit from having experienced advisors who know how to get it done.
Once you have a “meeting of the minds” on a deal, it is in everyone’s best interest to make the project a priority. “Time is of the Essence” in getting a deal done for a number of reasons for both the seller and the buyer. (including clients, employees, etc.)
Where are you in your process? If you’d like to discuss your situation, selling or buying a business or preparing your business for sale, please let us know. In the meantime, if you have questions or comments, I can be reached anytime via email: [email protected] or phone at: 224-688-8838. We’re here to help you harvest your potential.