Peak Performance vs. The Lame Duck

Business owners usually contact a business broker when they’re tired of running their company. Whatever their reason, they’re done. The end is in sight and they may have had one foot out the door for a while. They react poorly when we advise them to operate their business at peak performance while we’re trying to sell it.

“We’ve been at it long enough. Just look at how we were doing a few years ago before we decided to retire!” they say. Quack. Quack. “There’s a lot of potential that we’re leaving for the next owner!” Quack. Quack. Quack.

A buyer hears, “We’ve stopped taking care of our business because we don’t plan to be here long.”

It’s hard to miss the advertisements placed by those who “flip” real estate. “Cash paid, guaranteed, for your ugly house,” and the like. You may notice that there are no such signs offering to purchase a fixer-upper business. That’s because – and every business owner will tell you this – quickly improving the long-term profitability of a business is REALLY DIFFICULT. There is no quick money in flipping businesses. Too much risk. That’s why people want to buy a going concern that is profitable and thriving. It can take months to sell a business and if it starts to slip while it’s on the market then all of the prospective buyers will walk away with raised eyebrows and shaking heads.

Convinced? Good. Here’s what we mean by peak performance:

• Steady or increased revenue
• Consistent cost of goods sold as a percent of revenue
• Consistent expenses as a percent of revenue
• Steady or increased net income
• Consistent balance sheet (no big swings)
• Low turnover among employees
• Solid and loyal client base

To put it another way: You can’t take your foot off the gas just because you list your business for sale. It can be even more challenging when a serious, qualified buyer becomes involved because the business broker will need the seller to focus on offers, contracts, due diligence, and transition plans.

Is it a lot of work to sell your business?  Yes. That’s why you need a broker. Is it a lot of work to keep it running at peak performance when you’re all ready to hit the beach? Yes. Is doing so worth it in order to get top dollar at closing? Yes.

Even though a business owner can start the selling process at any time, it’s generally best to connect with your business broker before you’re too tired to make one more big push. When you think you might be ready, contact us.