Blog

Time for an exit? 5 questions to ask yourself

August 5, 2013 -  By

Like so many other entrepreneurs in the Green Industry, I founded my company with a truck and a mower.

Over our company’s 15-year journey, my business partner and I grew it to an organization with $7 million in sales and 100 employees.

Recently, we completed the long and challenging process of navigating a successful exit. More so than anything monetary, the voyage of founding, growing and exiting my company was a growing and enriching experience. The journey was the reward.

So is it time to begin considering an exit for your business? Many experts have shared their wisdom on this subject. From one Green Industry entrepreneur to another, I’d like to share some quick advice based on my experience that will be essential to ponder if you’re considering an exit.

1. Why now?

I’ll start by asking, “Why an exit and why now?” Are you tired of the business? Exhausted?  If so, this is not an ideal state of mind to begin exit planning, as the process will most likely be one of the most difficult journeys you’ve ever embarked on. I urge anyone considering an exit to begin the journey with vigor, excitement and a strong attitude because it will feel like running a marathon.

Perhaps you’re considering selling your business because of profitability issues: maybe margins are tight and you can’t seem to make the money you used to make. This is also a weak position to begin the arduous process of selling your business—primarily due to the fact your company’s net profit will be the determining factor to the valuation of your business in an acquisition.

2. Would I buy my company?

Ask yourself, “If I were looking to buy a landscape company, would I buy mine?” If you cannot honestly say yes, then this process is unlikely to turn out favorably.

Simply put, if your company is not profitable, there will be little to no interest from any acquiring parties, no matter what the business’ gross revenue. A rule of thumb is your company is worth three to five times the net profit it generates after all expenses and your salary.

Also, does your company have any debt? Liabilities typically are not assumed by the buyer, so satisfying those debts will come out of the proceeds.

3. Do I need a broker?

If you’re gung-ho and ready to dedicate at least a year to the process, I’d recommend partnering with a broker. My company used The Principium Group. A solid broker will help you navigate the process and generate interest in your company. However, don’t expect a broker to fix problems with your business. If you have glaring weaknesses in your accounting and books, taxes, litigation, cash flow or profitability, then take time to address those problems and resolve them before you start the process. I would strongly recommend not engaging any interest from acquiring parties without every major aspect of your business is strong health.

4. What’s the market like?

Manage your expectations. Research how many successful acquisitions have taken place in the Green Industry in the past three years, and you’ll probably find the market has cooled. The major national players haven’t made many moves in recent years; however, mutually beneficial deals can still get done.

Along with being realistic about the likelihood of a successful exit, also weigh the challenges associated with getting your company ready to sell.  You most likely will have to invest in your company’s operations, clientele, accounting and employees, setting the business up in optimal health to endure the hardships of a transition of ownership.

5. What about my staff?

Lastly, do you have any specific concerns for your staff? What about the people that helped you build the company? This concern was a primary one for my co-founder and me. It heavily influenced what organizations we engaged.

If this is a concern of yours it will keep you grounded and committed through the challenges of the process. Knowing you’re doing it for your staff, as well as for yourself, will help you overcome the obstacles and carry you through to the end.

In our company’s case, an acquisition was a win for all–our people, my co-founder and me and the acquiring organization. If you focus on creating a path on which all stake holders will benefit, you’ll begin the journey on solid footing to make it through the challenging process of selling your company.

This article is tagged with , , , and posted in Blog, Business

About the Author:

Bryan Clayton is the former owner of Peach Tree Landscapes in Nashville, Tenn. He's co-founder of yourgreenpal.com. Reach him at bryan@yourgreenpal.com.

1 Comment on "Time for an exit? 5 questions to ask yourself"

Trackback | Comments RSS Feed

  1. Ron Edmonds says:

    Insightful thoughts, Bryan. Thanks again for the opportunity to work with you.

    Ron

Like us On Facebook

BLOG ARCHIVES