The question "when is the right time to sell your company?" is certainly an important one. In most instances, selling your company will be the most important financial and personal decision that you make in your life. If you are like most business owners, the majority of your personal wealth resides in your company and selling is usually how an owner becomes financially fit for life.
Feel the boom.
There is a very interesting dynamic present in the green industry today. There is a very high percentage of Baby Boomer owners who are pondering selling their companies. If you look at Lawn & Landscape’s Top 100 list of contractors, the companies that participate are mostly owned by folks falling into the Baby Boomer category. Simply put, there are quite a few owners of landscape companies in their mid to late 50s and older, and they are contemplating retirement. If it’s not in the forefront of their minds, it is certainly on their mental horizon.
Another interesting dynamic at work today is our current economy. While you read about “cautious optimism” in the media, the bottom line is we are in a very serious economic run. It’s happening right now and it’s very important that all of us, and certainly business owners, focus on how to capitalize on it. You can read a plethora of economic forecasts and two things are pretty clear about this economy: We are in a very positive, growing economy, and it will not last forever.
Most economists agree that the next recession will arrive somewhere around 2018; the latest I’ve read is 2020 and as business owners it’s best to be conservative and plan for sooner than later. (One economist I pay keen attention to is Brian Beaulieu of ITR Economics. His accuracy of economic predicting is quite high and is an Economist I would recommend you follow.) All economies are cyclical and the US economy historically has been on a seven-year cycle, giving some credence to the thought that a 2018 recession has some historical relevance.
As business owners, it’s critical that you realize that right now is a serious make-money time period. You need to be 100-percent focused on restoring your wealth while also planning for the next downturn. I would have a three- to four-year horizon of capitalizing on this economic upswing but also have a plan for remaining lean, managing your debt and getting ready for our next downturn. Get after it now and have a plan in place to hunker down a bit in approximately four years, as I’m pretty confident history will be repeating itself.
Money on your mind.
There is another reality around all of this thinking that needs to be considered. The right time is when you are mentally and financially ready to retire, spend more time with family and life passions, and when the sale of your company will result in the proper financial windfall. But the right time is also when the economy is conducive to selling and that is happening right now, before our eyes.
The next three years will be very conducive to selling, if you are ready. For Baby Boomer owners, if you own your companies after 2018, you should plan to own your companies a minimum of six to eight years longer and enjoy being an owner in your early to mid-60s. What? Some of you are reading this thinking there is no way I want to own my company that long, right? Well, if the current thinking about the next recession is accurate, that will be the case. It will take two to three years to ride it out and another two to three years to bring your companies back to par. It is imperative you factor this thinking into your exit planning.
Work on your exit strategy now.
Develop and implement a strategy that capitalizes on today’s economy and incorporates planning for tomorrow. Grab topline revenue while continuing to measure everything and find ways to improve your bottom line results. Create an Earnings before interest, taxes, depreciation and amortization (EBITDA) calculation at the bottom of your P&L and start living EBITDA. Know what it is and drive results that increase it. Driving topline growth will require investing in your management team. Great! Assuming your hire properly, that only makes you more valuable and the added talent will produce better bottom line results along the way.
If you are one of the estimated 80 million Baby Boomers approaching retirement age and are the owner of a landscape business, it’s imperative you start positioning yourself for the end game – the next chapter.
Engage the right team of professionals to work in partnership with you so you exit in the proper fashion.