Thoughts from Dave Mead and discussion about issues and concerns for Small and Mid-size Businesses. Some discussion topics will include strategic planning and execution, improving profitability and cash flow, maximizing value for exit.
The Mead Consulting Group
has been helping lower middle market companies for many years.We don't
toot our own horn...we don't advertise....We let our clients' success
speak for us...But there are some things about us that may surprise
Did You Know?
We don't put junior people on your projects.
We've been there before!
Our senior consultants have been in your shoes and have fought the same battles.
[Editor's Note: At a recent gathering of business owners and CEOs,
the subject of timing to sell came up. One business owner offered that,
with the election of Donald Trump, we could expect another 4 to 8 years
of economic growth. He said that he was not going to consider selling
his business at this time. While I did not counter his argument
directly, I suggested that history tells us that in general terms
business cycles are politically agnostic - the cycle does not care who
is in the White House. I hope you find this article thought-provoking -dpm]
FACT:History tells us that this economic expansion cannot continue much longer. The
last 3 economic expansions in the United States have averaged 7.9
years, the 7 expansions before those averaged 6.2 years. We are
currently at 7.8 years in this expansion. While most economists expect
2017 and 2018 to be good years, a few reliable forecasters (and there
are only a few economists who are reliable in forecasting) predict that
the 2nd half of 2018 may usher in a downturn through
2019-2020. Whether that timing is precise or not, it is highly unlikely
that we will see this current economic expansion continue for another 4
you thinking you might be selling your business in the next 3-6 years?
If so, then you may be surprised by the following: It is time to start
the preparation process RIGHT NOW!
a business can be one of the most significant events in the life of an
entrepreneur. Not only is there a lot of emotional capital to deal with,
but many business owners often have the bulk of their wealth and
retirement assets tied up in the value of their business. Sell it for
the right price and retirement is fantastic! Sell it for far less than
you expect, and retirement may not be retirement at all. Sell it in the
right way, and your legacy continues; sell it without forethought and
planning, and your employees may be out on the street.
Today's sellers' market may be transformed into a buyers' market. The
last few years have been an extraordinary time for sellers. Interest
rates make borrowing for buyers inexpensive, and there have been many
more buyers on the market than sellers. Competition among buyers for
good companies is intense and sales multiples are at record high levels,
most business owners don't realize is that there is a coming buyer's
market for businesses. Here's why: there are a lot of Baby Boomer
entrepreneurs who have built great companies and run them for 10, 20, 30
years or more. They are thinking about harvesting their investment and
doing something else for a lot of good reasons. Some believe that they
have met their financial retirement goals and they can back off, others
have just lost enthusiasm, and some, unfortunately, have personal or
family issues that preclude them from the continued necessary time and
energy investments. Some have been advised that it is risky to have "all
of their eggs in one basket", and want to sell a portion of their
business to diversify their retirement portfolio. Many, including me,
expected this bubble of sellers to occur before now, but with the stock
market boom, changes in retirement age expectations, etc., this boom has
not disappeared, it has merely shifted. (After all, none of us are
the same time, the next generation of workers are very
entrepreneurially focused themselves. They often want to start their own
businesses rather than buy an existing one, even though the risk of
failure is much greater. That means there may be fewer interested buyers
for your business when you need them most.
Why think about it now? It may take longer than you think. If
you plan to sell in several years, you have a lot of time to think
about it, right? Not really. Most owners and CEOs of middle market
companies may not realize that it can take 3 - 6 years to make the most
graceful and profitable exit. At a high-level, the timeline can look
something like this:
Prepare the business for sale (18- 36 months)
Locate buyers, negotiate the deal, and execute the transaction (6-12 months)
Owner or CEO commitment to support the transition to new ownership (6 -36 months)
can always "sell now, as is" if you want, but you may be leaving
MILLIONS of dollars on the table by doing so. Preparing your business
for sale today means that you will have a lot of flexibility as to when
and how you execute the transaction.
Another critical reason to prepare your business for sale is simple: life happens.Any
number of unexpected and unfortunate events can disrupt your operations
and your plans, and frankly, the older you are, the more likely some of
them are to occur. These nasty little possible surprises include:
Dissenting Owners and
On the positive side of the coin, there are any number of wonderful things that might come your way, too, such as:
An opportunity to purchase a competitor,
A significant offer by a competitor or private equity firm,
A great expansion opportunity, or
A buyout offer from a partner.
you are prepared for sale, then your company has a higher value to
competitors, partners, private equity firms, and lenders. You will
absolutely be in better shape to take advantages of the opportunities
that come your way, too.
here's the bottom line: if you want to sell your business on your
terms, then you need to begin right away to run your business to
increase its value and develop a business transition strategy.
Preparing your business to be ready for sale. In
order to sell quickly and for a great price, you have to have
exceptional value. And as with a private home, you will be far better
off working ahead to prepare your business for sale.
you stage a home for sale, you paint the walls, fix the roof, take out
half of your stuff, landscape a little, and remove the personal
distractions. You work with a real estate agent / broker to sell your
home and you get out of the way. The process is disruptive, but
hopefully only for a few months.
you stage a business for sale, the process is dramatically different.
You want to present a picture of healthy profitability trending upwards
with a management team that will stick around after the sale. You need
to communicate with great confidence that the customers and partnership
relationships you have spent years developing will transfer to the new
owners. And as with selling your home, you need to get out of the way -
the new owners need to be convinced that the business will operate
smoothly without you.
In summary, the five things that most purchasers look for are:
A solid performance history
A capable management team
A great growth story, including recent steady growth and strategic growth opportunities
Consistently improving cash flow and EBITDA
A smooth and thoughtful transition plan and no due diligence surprises
the sales process is often disruptive to the business. Handled poorly,
it can take months and you may lose valuable customers, momentum, and
employees. The more carefully you plan for the transition, the less time
it will take and the more business value and momentum you will
Mead Consulting Group has been helping middle market companies for over
20 years to add value and prepare for a successful transition. Our
clients have consistently enjoyed better results. Investment bankers
have told us that our clients are among the best prepared that they have
If you would like to discuss how we might help your company begin the process of adding value and being better prepared, please contact me.