Many business owners have an exit strategy that involves succession planning or pulling in partners to buy them out. Some dream of reclining to the back seat as a share holder or remaining on the board as an active Director or Consultant. I had tinkered with the idea of selling, I had even been approached on several occasions with offers to buy my companies but I never gave it full throttle until the unthinkable touched our family. In November 2009, our young daughter was diagnosed with a serious, neurological issue and in 4 short months we watched it progress from something fairly simple to manage; to something that would change our lives permanently.
Many business advisors will tell you that selling during times of illness and health concerns are the worst as you find yourself distracted, divided and inattentive to the needs of the business. This was an understatement of great proportions, not to mention that we were still in the middle of a global recession and many baby stores had recently gone out of business both in Calgary and across the country. This was my first hard lesson in "real-life" contingency planning.
The first step was to research the process thoroughly and to determine which stores to sell off and how to sell. However, it was one thing knowing what had to be done, it was another getting to the first step of really letting go of the passionate attachment to the business. Any entrepreneur knows that your business becomes an appendage, an extensions of yourself. This was my alter-baby, I had poured countless hours of blood and sweat equity into this. Was I really ready to sell it? I can tell you, as a mother sitting at my daughter's hospital bedside for one of the scariest weeks of my life, I knew it was absolutely the time.
My bo bebe store chain was partially franchised and partially corporate run which meant for a more complicated, longer planning process and selling process. Knowing that I was responsible for only running 3 of these stores, I figured I could wait and place the first business sale focus on my 2 other businesses, Shooligans Kid's Shoe Store and Urban Toy Bin.
Serious account planning and 30+ employees and their families had to be taken into consideration. It was time, the decision was made and now I had to exhale and let go. After careful consideration, the decision was ultimately made to first sell the Shooligans Kids Shoe store. We initiated a fast deadline of June 30, 2010 as our daughter's 2 year, intensive treatment was to start in August, 2010. Our Accountants were informed and the time lines were quickly plotted.
The next important lesson I learned in this process is that just like selling a house, you need to have your affairs in order. Regardless of the reasons for wanting or needing to sell; your business must present as professional and organized It is paramount to have your books in order, inventory records well maintained, your merchandisie and store displays must be properly and professionally executed and above all, everything must be clean and stocked at all times. Just like home showings, potential buyers can show up at a moment's notice.
Part of l the emotional detachment of selling is to have your business evaluated by an industry professional. Whether it is your accountant, business advisor or a contracted commercial agent, you need a Third Party. It is imperative that as a business owner, you remain unbiased and detached from the evaluating decision. Similar to asking a mother how cute her baby is, she simply cannot offer an unbiased clarity and is unable to give an objective opinion. The emotional price tag you hold in your heart is often very different from what the actual buyer will pay for your business. Luckily, in Canada, you can employ a Chartered Business Valuator (CBV) to improve this process. You can search their online listings, by city or province for qualified consulting agents in your area at www.cicbv.ca/FindaCBV. At present time, they have over 1200 professionals in this field.
Once you remove the emotional factor and hire your Business Valuator, your next step is the valuation process itself. It is imperative to remember that there are many valuation types and factors that play into your selling price, the current economy, your specific industry (not just your your Income Statement or Balance Sheet). Various types of valuations looks at your company's value by comparing your business to similar businesses, within the same field that have recently sold. Obviously, this method is difficult at best in the juvenile field as there are only a handful of comparable retailers in each city . If there is a shortage of true competitors, there is no true market history for which to make that comparison. For my Shooligans shoe store, it was literally the only specialty children's shoe retailer in Calgary; therefore Market Value did not apply.
The best approach for me was a flat Asset-based evaluation. This was a sale price of all items such as inventory, fixtures, computer systems, store displays, customer database, trademarks etc. A 2nd option for asset-based evaluation is liquidation asset-based. This calculates the net cash that the buyer receives if all assets were sold and liabilities paid off. Either way, this is where it pays off to have state-of-the-art computer systems and software logistics to produce detailed inventory reports and cost breakdowns for both parties.
We chose an Asset-based sale and moved forward to find a buyer. Luckily, finding interested buyers was effortless through social media and our various business connections and personal contacts. The viral effect of putting our sale message out to the public was instant and we had several interested parties immediately. The most time consuming aspect of selling (after ensuring all the books were caught up of course!) was probably the qualifying process for each potential buyer. This is easliy achieved with the help of your accountant and a thorough evaluation of the buyer's current financial statements and Asset/Liabilities sheets.
When it came time to sign the sale contract, I expected a somewhat drawn out negotiation process and was pleasantly surprised when our buyers came to the table and agreed to our asking price in exchange for a very amicable hand-off. They saw the value in maintaining and paying for my 14 years retail experience as part of the package. To this day I enjoy a very friendly, business relationship with the the new owners and have stayed on as a part-time, as-needed consultant. They appreciate the feedback and guidance and I have to admit I love seeing "my baby" in such good hands!
I would not expect all business transactions to end this softly but I do hope it goes this way for the bo bebe stores when they sell as well.
TIPS FOR SELLING YOUR BUSINESS:
-A good lawyer and accountant will help in valuations but also to help determine "how" to sell. Ask about the Capital Gains Tax and other payment options that will protect your profits
-Consider payment flexibility to get the right buyer and the right deal.
-Know your limits and bottom line long before you get to the negotiation table in order to keep on target
-Offer consulting and ongoing training (to ease your Buyer's new business nerves)
-Make your employees part of the contract. Protect their jobs and wages and ultimately your integrity.
Leah Chevallier, serial entrepreneur in the Juvenile Industry sharing insight, success and 18 years of award winning retail experience! Took $2000 Micro-credit loan and turned it into $30 million!