A close family friend stopped me after church the other day and asked if we could meet later in the week. When he walked into my office, I could tell that he was worried about something. It didn’t take long for him to begin describing his dilemma.
“My sons don’t want to be inside the business anymore and are pushing me to sell.” He paused and looked out the window. “This is my life’s work…but I’m not sure what my next move is.” This admission was delivered in a quiet tone, defeat sounding a dull drumbeat in his voice.
I hear a version of this conversation at least once a month. Business owners who have spent their working lives developing, growing and expanding their businesses, but they recognize that it may be time to let go. They just don’t know how.
Transition from Friends/Family to Professional Management
One of the most critical aspects in grooming a company for sale is the transition from Friends and Family to Professional Management. The valuation of your company depends on the continued production of goods or delivery of services after the sale. A key component to gaining the confidence of a serious buyer is to demonstrate that your company will continued to be managed professionally after the sale.
The roles and responsibilities of senior management may need to be redefined or restructured. An objective analysis of the company’s structure, processes and systems should also be performed, to identify those areas that might cause concern for a potential buyer. This process generally takes 1-3 years to complete and requires commitment and focus on the end goal.
That day in my office, I shared with my friend that his situation was not unusual. In fact, it was very common for private business owners to face a dilemma that is outside their area or scope of knowledge. The key was to recognize that you don’t know what you don’t know.
“I can help you,” I told him.
He looked relieved but puzzled. “How can a lawyer help me sell my company?”
I smiled and reminded him that preparing to sell your company takes a different mindset than starting or growing it.
“Is this that new ‘Growth to Exit’ thing you’ve been telling me about?”
I laughed and said, “When do you want to start?”
James D. Shields is founder and principal of Shields Legal Group, an innovative law firm focused on helping private middle market companies, capital managers and investors improve their processes and systems to achieve the highest profit and valuation. An entrepreneur at heart, Shields has owned or invested in numerous companies and he has advised C-suite executives and business owners on strategy, risk evaluation and resolution to enhance shareholder value and grow revenue. The creator of Growth to Exit™, Shields shares his business acumen and strategic planning skills with middle-market companies in transition to higher enterprise value or succession planning.
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