Pushing your luck bad in business and blackjack by Scott Bushkie, CBI, M&AMI

I was at a conference recently and visited the blackjack table in our hotel. I was a couple of hundred bucks ahead and knew it was time to walk away, but I wanted just a little bit more.  I doubled down on a bet I should have won, and…let’s just say I was lucky to walk away with my initial investment.

It’s ironic. One of my biggest messages to business owners is always “quit while you’re ahead.” The last thing you want to do is walk away from your business while the chips are down. You’ll get more value for a business on an upward climb than one with a flat revenue pattern (or worse, a decline).

Many business owners procrastinate when it comes to preparing for a sale. Some are like me at that blackjack table—they’re on a roll and they want to see what they can get out of few more hands (years). Others are too emotionally attached to the business to consider selling “just yet.”

That kind of procrastination often translates to losses at the closing table. The number one reason most business owners do eventually sell is because they’re burned out. They hold on until running the business isn’t fun anymore, and that lack of enthusiasm becomes evident in the company’s performance.

We worked with one 38-year-old looking to sell his business to a multibillion organization, and he was very clear he could continue to run his company for several more years. If the buyer wanted his business, they were going to have to pay a premium for it.

On the other hand, we worked with a gentleman in his 80s who had held onto his family business long past the time he was committed to the operation. The business was in the second generation and had been profitable for 82 of its 85 years – I am sure you can guess which three years were not profitable. By the time we got involved, the bank was threatening closure.

You can see how one seller had leverage and the other had none. But I’m not just talking about extreme situations. We’re currently representing an owner who wants to sell in the next five years, but (based on company performance, current tax issues and the favorable M&A market) decided to test the waters now. If he doesn’t get the value he’s looking for, he can always decide to wait for a later date.

When it comes to selling a business, you want to walk away with a full stack of chips. If you sell when the business is strong and you’re still fully engaged, you’ll show the kind of positive trends that maximize value.

I should have walked away from that blackjack table, but I was on a roll and I had a great hand.  Then the dealer hit a five card 21. Bad things happened to my blackjack game and bad things happen to good business owners. The best time to sell is when you don’t have to.

Scott Bushkie is Principal of Cornerstone Business Services. To request a book (at no cost) with advice on the exit planning process contact Scott at (888) 829.9061 or[email protected].

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A thought-leader in the industry, Scott developed the Cornerstone Process to offer investment banking M&A-level services to the lower middle market. The result is a closing ratio that’s more than double the national average.