1228: Cash Out or Hold Out: Is It Time To Sell Your Company? by Christine Comaford of Smart Tribes Institute on Exit Strategy & Business Sale

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Episode 1228:

Christine Comaford emphasizes the critical decision-making process involved in selling a business, addressing the key reasons why entrepreneurs consider selling, including the Seven D's, private equity interest, and international investment opportunities. She outlines the importance of assessing your company's market appeal, growth potential, and the personal legacy desires of the business owner. Comaford provides a strategic blueprint for enhancing a company's value through motivation, momentum, scalable business models, high-performing teams, effective sales and marketing, and influential mentorship, aiming to make the company irresistible to potential acquirers.

Read along with the original article(s) here: https://smarttribesinstitute.com/cash-out-or-hold-out-is-it-time-to-sell-your-company/

Quotes to ponder:

"Develop a business model that is scalable, has defensible diversity, and is supported by efficient operations to optimize profit."

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[00:54.200 --> 00:59.200] Hey there! Did you know Kroger always gives you savings and rewards on top of our lower than [00:59.200 --> 01:04.480] low prices? And when you download the Kroger app, you'll enjoy over $500 in savings every [01:04.480 --> 01:09.560] week with digital coupons. And don't forget fuel points to help you save up to $1 per gallon [01:09.560 --> 01:13.720] at the pump. Want to save even more? With a Boost membership, you'll get double fuel [01:13.720 --> 01:20.120] points and free delivery. So shop and save big at Kroger today! Kroger, fresh for everyone. [01:20.120 --> 01:30.280] This is Optimal Work Daily episode 1228. Cash out or hold out. Is it time to sell your [01:30.280 --> 01:36.840] company? By Christine Como Ford of SmartTribesInstitute.com. And I'm Dan, your host of the [01:36.840 --> 01:41.200] show, and welcome back to Optimal Work Daily, where I read to you every single day from [01:41.200 --> 01:45.240] some of the best blogs around. So let's do that right now as we get into our post [01:45.240 --> 01:54.400] from Christine and optimize your life. Cash out or hold out. Is it time to sell your [01:54.400 --> 02:02.320] company? By Christine Como Ford of SmartTribesInstitute.com. Are you slaving away building a business [02:02.320 --> 02:10.280] with no plan or process or path to one day cash out? If so, I think I know why. One, you're [02:10.280 --> 02:15.200] so busy running your business, you don't have time to plan your exit. Or two, you've [02:15.200 --> 02:19.960] likely not built a business that you've sold for many millions. Or if you have, you've likely [02:19.960 --> 02:24.520] not done it five times yourself and helped others do it 50 times, so you're not sure [02:24.520 --> 02:31.720] what the process is. Why and when to sell? Every week CEOs call me asking for help in growing [02:31.720 --> 02:36.560] their business. The majority want to one day sell all or a portion of their company either [02:36.560 --> 02:43.520] to outsiders or to their own team. Why sell? Reason number one, the seven D's. [02:43.520 --> 02:48.520] Generally, I find founders want to sell their company when one or more of the famous D's [02:48.520 --> 02:56.960] are present. Disenchantment, disability, disagreement, disintermediation, excessive debt, death, [02:56.960 --> 03:04.400] divorce, disease. Guy Bodrie, managing director of STS Capital says, quote, when one or more [03:04.400 --> 03:09.040] of these D's are in play, we can be assured that a business owner is interested in divesting [03:09.040 --> 03:15.200] of his or her business. End quote. If you've got one or more of the seven D's, it's time [03:15.200 --> 03:20.240] to sit down with a trusted advisor to explore your options. One of them will likely be able [03:20.240 --> 03:25.040] to start grooming your business to sell for top dollar starting now. Keep listening to [03:25.040 --> 03:32.320] learn how. Reason number two, opportunity knocks, private equity version. Since the beginning [03:32.320 --> 03:37.520] of 2012 and even going back to the second half of 2011, an increasing amount of capital [03:37.520 --> 03:41.600] has become available, especially from private equity groups who are coming under pressure [03:41.600 --> 03:46.720] to invest the funds they've been sitting on. Funds that are in year two or three of their [03:46.720 --> 03:51.160] investment cycle and have only deployed a small portion of their capital are especially [03:51.160 --> 03:58.800] in trouble. How big is the private equity overhang? $400 billion. Yes friends, there's an excess [03:58.800 --> 04:04.160] of $400 billion of capital needing to be deployed. These funds better get busy. [04:05.120 --> 04:11.840] Reason number three, opportunity knocks, international version. On another front, we're witnessing an [04:11.840 --> 04:17.440] increased desire by Asian investors, especially the Chinese and the Japanese, to invest abroad, [04:17.440 --> 04:23.840] and especially in the Americas. STS Capital Partners is actively involved in providing Asian buyers [04:23.840 --> 04:28.880] with opportunities to invest, with a typical range of investment from $100 million and up. [04:30.080 --> 04:35.360] Could take care of one's expansion capital needs, yes? Reasons number four through six, [04:35.920 --> 04:42.160] reality check, aka what matters to the market. In addition to the three reasons so far, [04:42.160 --> 04:47.200] let's overlay the reality check reason on top. Atlas Capital Strategies lists three, [04:47.920 --> 04:53.600] A. The market for your business and or industry is currently drawing a lot of attention with strong [04:53.600 --> 05:00.240] market valuations. B. Your company is growing and posting modest revenue and earnings growth, [05:00.240 --> 05:05.200] and your industry is experiencing moderate M&A activity with reasonable valuations. [05:06.000 --> 05:12.480] Or C. Your industry is out of favor with acquirers and investors, or a particular company is [05:12.480 --> 05:17.680] struggling to grow and can expect anemic valuations. Should you stay or should you go? [05:18.320 --> 05:25.680] Based on which is true for you, here are your alternatives. Go or stay, sell the entire company, [05:25.680 --> 05:31.520] appropriate for Category A to allow you to retire, stay for a term to see if it's still fun, [05:31.520 --> 05:40.560] or move on to your next venture, or stay. Sell part of the company, ideal situation for Category A and B [05:40.560 --> 05:45.120] to get partial liquidity now, and continue to drive your business to the next level to [05:45.120 --> 05:52.560] reap a greater payday in the future. Or stay, acquire another company, suitable for any of the [05:52.560 --> 05:57.120] three categories to boost top line growth and improve earnings for the combined entities. [05:57.840 --> 06:04.480] Or stay, focus on organic growth. All companies can benefit from such a strategy, [06:04.480 --> 06:10.480] however, categories B and C have a more pressing need to assess core product and service offerings, [06:10.640 --> 06:16.400] realign the organization, and better manage expenses to prepare to sell when the market improves [06:16.400 --> 06:22.400] for your industry. You can always get what you want. Another great point my friends at Atlas [06:22.400 --> 06:27.360] Capital Strategies make is that before you execute an engagement letter with your advisor, [06:27.360 --> 06:33.360] be sure to articulate your ideal legacy. Consider these two factors, what you need. [06:34.000 --> 06:39.120] This is the rational goal to understand how much money is required on an after-tax basis for [06:39.120 --> 06:45.600] you to accomplish your goals, and what you want. Three highly emotional issues are then addressed [06:45.600 --> 06:52.800] that create the true legacy for you as the business owner. Number one, your role. You may desire to [06:52.800 --> 06:58.000] remain with the business as CEO to take the business to the next level, or you may want to be named [06:58.000 --> 07:03.360] chairman so you can still be involved. Perhaps you wish to limit your operating role to one facet of [07:03.440 --> 07:09.280] the business such as sales or product development, or like many, you want to exit completely as [07:09.280 --> 07:15.200] quickly as possible following the sale and transition. Two, what happens to your employees? [07:16.240 --> 07:21.680] Do you want to protect each and every employee with zero layoffs? Do you recognize some reductions [07:21.680 --> 07:26.880] in the workforce are inevitable to improve the efficiency of the business? Or are you okay with [07:26.880 --> 07:31.680] wholesale reductions in force to take advantage of synergies when merging with a larger entity? [07:32.320 --> 07:35.600] This often results in a very high valuation for the business as well. [07:36.560 --> 07:42.240] And three, what happens to the entity? The two outcomes here are whether the business remains an [07:42.240 --> 07:49.840] independent operating entity or subsidiary, or the people, products and services, IP, and other assets [07:49.840 --> 07:54.320] are simply being absorbed by an acquirer with the original entity being dissolved. [07:54.880 --> 07:59.280] Companies with little brand equity in their niche usually consider a sale to a larger, [07:59.280 --> 08:03.600] more successful enterprise to be highly beneficial for their customers and employees. [08:04.320 --> 08:08.960] So let's say that you've decided you want to sell and you've made the serious decisions listed. [08:09.600 --> 08:17.040] Now let's cover the proven process. The net net on boosting value. In the 50 companies I've helped [08:17.040 --> 08:23.920] build to sell with purchase prices ranging from $12 million to $425 million, there are six [08:23.920 --> 08:26.720] key essential steps to a glorious liquidity event. [08:27.440 --> 08:33.760] One, motivation. Design your business to be sold for the amount you want, on the terms you want, [08:33.760 --> 08:41.760] at the time you want. Two, momentum. Get and keep massive momentum so your company grows quickly [08:41.760 --> 08:45.840] yet sanely, increasing its value to acquirers on a monthly basis. [08:46.960 --> 08:51.280] Three, model. Develop a business model that is scalable, [08:51.280 --> 08:56.160] has defensible diversity, and is supported by efficient operations to optimize profit. [08:57.120 --> 09:04.080] Four, MVPs. Create a high performance team that consistently delivers results and innovation [09:04.080 --> 09:11.120] to boost your company's value. Five, money. Develop a sales and marketing process and strategy [09:11.120 --> 09:15.200] that delivers compelling and reliable revenue to your company year over year. [09:16.160 --> 09:21.040] And six, mentor. The right influential advisors and alliances [09:21.040 --> 09:25.520] who will raise your profile with potential acquirers and significantly increase your company's [09:25.520 --> 09:30.560] credibility and thought leadership. Ultimately, the goal is to make your company irresistible to [09:30.560 --> 09:36.080] potential acquirers. Let's say that you have a fantastic seasoned executive coach and they [09:36.080 --> 09:41.200] are helping you and your team with what we've talked about. Wonderful. And if you don't have one, [09:41.200 --> 09:42.160] get one now. 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You'll get that [11:00.000 --> 11:06.960] free gift and free shipping when you spend $125 or more. That's nuts.com slash OWD. [11:08.880 --> 11:16.560] TIAA is on a mission. Why? Because 54% of Black Americans don't have enough savings to retire. [11:16.560 --> 11:22.880] So in collaboration with big name artists like Wycliffe John, TIAA released Paper Right, [11:22.880 --> 11:29.360] new music inspiring a new financial future. With 100% of streaming sales going to a nonprofit [11:29.360 --> 11:34.400] that teaches students how to invest. Stream Paper Right Now and help close the gap. [11:34.400 --> 11:41.440] And thank you so much to Christine for another great post. For over 30 years, [11:41.440 --> 11:46.480] leadership and culture coach, serial entrepreneur and New York Times best-selling author Christine [11:46.480 --> 11:53.040] Comaford has helped leaders navigate growth and change. She specializes in applied neuroscience [11:53.040 --> 11:57.840] which helps her clients achieve tremendous results in record time. As an entrepreneur, [11:57.840 --> 12:03.920] she built and sold five companies with an average ROI of 700% and she was a software engineer in the [12:03.920 --> 12:09.680] early days of Microsoft and Apple as well. Christine is a human behavior expert, a leadership [12:09.680 --> 12:16.000] columnist for Forbes.com and the New York Times best-selling author of Power Your Tribe, Smart Tribes [12:16.000 --> 12:22.320] and Rules for Renegades. So come buy Smart Tribes Institute.com to learn a lot more and check out [12:22.320 --> 12:27.520] their resources. So that is going to do it for this episode. I appreciate you joining me here [12:27.520 --> 12:32.720] as always and I'll see you right back here tomorrow for another post and that is where your optimal [12:32.720 --> 12:34.720] life awaits. 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