Last Minute Jitters before Closing the Sale

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JittersIt’s late at night, you can’t sleep, and you’re hearing negative thoughts.  You’re only weeks away from officially buying a new business, and questions like:

  • Should I do this? (perhaps you’ve got a great and secure job)
  • What if I lose everything? (you’ve spent many years saving and scrimping)
  • What if I fail? (what will your loved ones and friends think – you can’t bear to let them down)

come into your mind. The questions are not unreasonable, but should you listen to them or ignore them? We say do both.

Listen

Write down these questions and systematically go through what has brought you this far.  This can result in counter-questions:

  • Did you do the due diligence thoroughly and properly? Do you have any more questions you need answered?
  • Is the financing lined up? Are you clear on the details?
  • Is your legal situation settled? Do you have the structure in place that suits your accounting and tax goals?
  • Do you understand the business? Have you been a student not just of the products and services, but of the DNA of the company itself?
  • Do you have a plan for the first 100 days? Do you have what you need from the owner in order to make a great start?

Then, Ignore

You’ve taken the time to re-answer these questions, and so now it’s time to put these doubts in context and see them for what they are: totally normal. The jitters are a psychological reminder that you’ve got skin in the game. But use the jitters to guide your energy and excitement. Don’t let them dominate you or the transition.

What are questions you have about buying or selling a business that you’d like to have answered?  We’d love to help!

Apex is actively searching for top quality candidates to join our team of Advisors. If you’re interested in a career helping people buy or sell a business, think you have relevant experience, and want to find out more, please call Doug Hubler, President of Apex, at (913) 433-2303.

Case Study #26: When Ego Costs you Money

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Mala BeadsAfter law school, Diana House took some time off in Bali, Indonesia, where she discovered that people were fascinated with Mala beads – meditation beads used by serious practitioners of yoga. Sensing a blue ocean opportunity, she built a website and in the very first month of business she had paid for the website and had money in the bank.

The Process

Diana used local Indonesian artisans, as well as factories in China and India to create what she characterized as “luxury yoga jewelry.” Not only was she first to market, but she really pushed the gas, using Facebook organic marketing, email marketing, and influencer marketing long before it was a common practice. She would give the jewelry to well-known yoga teachers in exchange for their sharing it with their communities.

She quickly hit seven figures in revenue and after the first year she wanted to sell. Diana is a serial entrepreneur and personally she was becoming less interested in yoga and wasn’t wearing the jewelry. A sale she pursued fell apart and she didn’t look to sell again for five years.

The Problem

Diana had too many irons in the fire, trying to run multiple businesses while also trying to organize a wedding for herself, and at one point when she asked her accountant when she should sell Tiny Devotions, this yoga jewelry company, he told her, “a year ago.” The revenue was starting to flat-line, and while it hadn’t yet started to decline, all signs pointed to complacency from the founder.

Diana knew that she was mentally checked out of the business, and in a small business, the staff feed off the energy of the leadership team. Diana had been out of operations for years and so without her attention it was simply running on autopilot. In the meantime, literally thousands of competitors had moved into the space and were competing well and driving her once 80% margins way down.

The Failed Sales

E-commerce businesses sell on average for three times normalized EBITDA. Diana used this number in early conversations with potential buyers and started three planned months of diligence with a strategic buyer that had given her a great offer. Despite having a law background, and despite seeing that there was no deposit required at time of the LOI, Diana chose to hold back on stopping things to push this deal point. She was also the one driving the due diligence process: a huge red flag. Unsurprisingly, 2.5 months into the three planned months, the “acquirer” decided to sell his company instead of acquiring hers.

At this point, revenue had started to decline and she thought she was being too smart for her own good trying to sell the business on her own. She hired business brokers to try to sell the business, but kept running into roadblocks like lack of financing, unreasonable requests during the diligence period, and even one fight between spouses about the deposit amount that killed a deal right at the start.

Despair

DespairDiana’s lack of engagement turned into despair about the business, and she started to see that her ego was goading her to sell the business because she didn’t want to be one of “those people” who shut down a business because she couldn’t find a buyer. But she realized that the mental anguish she was going through in being tied to something she no longer cared about was much worse, and she set a deadline of “sell or close down” by the end of August. It was August 1st when she made that decision, and on a whim, emailed her customer list letting them know she was planning to sell, but would have very tough deadlines to meet in order to close on time.

The last offer she got, she told the buyer that she needed a deposit that evening, due diligence to complete in 48 hours, and the deal to close in 9 days.  As crazy as those terms may seem, we have seen such deals go through on more than one occasion, and in this case, it happened for Diana, but not without a few bruises, bumps, and lessons learned.

Lessons

It’s refreshing to hear people who can put their ego aside and point out things they did wrong in order to make sure others don’t do the same.

  • Sell when you’re no longer engaged. Diana did try to sell early on, but she notes she should have simply tried again, probably with a broker.
  • Sell when you’re in a good market position. Diana waited too long, when competitors became entrenched and were bringing great skills to the game.
  • Use a deadline to drive a sale. This isn’t just something you set with an acquirer, but a mental one for yourself, to drive momentum.
  • Get out of your own head. Don’t force a sale for prestige for yourself.  A sale has to be for the right reasons, not just to satisfy your own ego.

Apex is actively searching for top quality candidates to join our team of Advisors. If you’re interested in a career helping people buy or sell a business, think you have relevant experience, and want to find out more, please call Doug Hubler, President of Apex, at (913) 433-2303.

Year End Review

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Year End ReviewIn previous articles we’ve made the case for having an annual meeting to make sure your staff are properly rewarded for the year that has passed and are properly oriented for the year to come. But, have you considered doing an annual meeting for yourself? A Year End Review, you could call it. Enough time has passed since the beginning of the year that you can’t defer to holidays and time off. We are well and truly into the year, but it’s also a perfect time, if you haven’t already done so, to look back.

How did it go?

The question that sits above all the other more specific ones is “how did last year go?” Did you feel good about it? Why or why not?

This assumes some things: that you had a plan or orientation for last year whereby you have something to judge or compare it to. If you didn’t have a plan, well that’s only fine if you actually intended that, most probably because you are happy with your performance and hit the cruise control button for your life last year. And you might be ready to do that again this year. But the point is that’s not laziness. That’s being intentional. It’s knowing what you want and then executing it.

The same cannot be said of the person who put up some goals, entirely missed them, and then moves into the next year setting new goals without examining what went wrong with last year.

If you own a business

How did we do against last year’s numbers? What will we do this year? Am I still excited about this? Why or why not? Do I want to sell? If not, do I have an exit strategy?

If you want to own a business

Why do you want to own a business? Have you talked to a broker about it? Have you taken at least a basic look at how you would finance it? How serious are you about it?

If you have a job

How was your pay and performance this last year? Are you happy with them? Why or why not? What will be your exciting challenges this year? Will there be any? Why or why not? Is this really what you want to do – short, medium, or long term?

If you want to get a new job (or own a business – see above!)

Why are you unhappy at your current job? What are the top things that you dislike that you would like to see rectified in a new situation? How serious are you about making this change? Why or why not?

We have a pretty good record of hitting our goals here at Apex, but we don’t let that build complacency.  We’re always looking to improve and do better every year. Give us a call to see if we can be of help in your goals for this year.

Apex is actively searching for top quality candidates to join our team of Advisors. If you’re interested in a career helping people buy or sell a business, think you have relevant experience, and want to find out more, please call Doug Hubler, President of Apex, at (913) 433-2303.