I sold a business at the end of 2017.
I owned the business for 3 ½ years, and during that time increased the value by 125%. I’m thrilled with the outcome, but I have been watching the new owner operate the business with more than a little jealousy. He’s been able to do several things “right” that I couldn’t let myself do.
Since the new owner purchased the business, he’s changed things. Things that I would have loved to change when I owned the business but couldn’t because I knew I wanted to sell the business – and that made doing some things the “right way”, wrong.
Let’s take a simple example. The business used a fair amount of electricity, much of it used in lighting fixtures. Most of which were old fluorescents. Almost immediately the new owner switched to LED’s. He’s going to save good money off his monthly electrical bill, and a whole pile of it over time.
After I bought the property I had an energy audit done. Near the very top of the list of opportunities was switching out the fluorescents for LED’s. Doing so made sense in every way except for the fact that I wasn’t planning to be the owner when that investment finally started paying back. The upfront costs would have hurt my financial results more that the benefit achieved in the short time I was planning to own the business. It was the right thing to do but would have run directly counter to my exit goals.
This was one of a dozen examples I could have used where the new owner is doing things “right” that would have been wrong for me. I like to run businesses I own the “right” way but wanting to sell a business changes everything.
Too often business owners do everything “right” and end up seeing those decisions negatively impact the results the business generates. Then they are left trying to justify a higher business valuation based on something other than results – and that almost never works.
“We made money, but then we invested it back into the business” is what the seller says, but what the buyer (and their banker) hears is “we didn’t make any money”.
If you’re serious about making an exit, and maximizing the value you receive, you need to start seeing your business and the results it achieves with those exit goals in mind. Many decisions you’ll make the same way, but some of the choices will change dramatically when viewed through that exit goal.
Are you interested in selling your business? When? With the right answer you can start doing the wrong thing for all the right reasons.