No One will Target Your Lifestyle for a Strategic Acquisition
The catastrophic mistake owners make when selling their business is to assume investors prefer prestige over profit. A perfect example is the owner who thinks his lifestyle, and not his business, will be the target of a strategic acquisition with high multiples.
This post is inspired by a printing owner who put his business up for sale back in 2007, when everyone was riding high. He was asking a very high price, but at first glance, it seemed reasonable, considering how well his business was doing.
Upon further review, however, it was apparent that all that revenue was being squandered, and his net income was being spent on prestige. His operation had a lot of fat, but he didn’t care. He was living large, and he thought a buyer would be impressed by his toys and his lifestyle.
Guess what? Investors cared. No one bought his business. Here are 5 reasons why he should have been focusing on selling his business, and not his lifestyle.
- Investors always make profit their top priority. A savvy investor could take one look at the seller’s books and see that his operations were not lean. His expenses were high, and once revenues slumped, profits would be tiny.
- Investors invest in tomorrow, not today. Things were going well for the printer – at the moment. But an investor doesn’t want a business that’s floating on the tide of prosperity along with everyone else. They want a model that’s makes its own waves.
- Investors won’t be living the owner’s lifestyle. In most cases, an owner is adding a focused and strategic acquisition to his portfolio, or as a complementary business. They’re not going to assume your lifestyle. It’s likely that they’ll hire one or two people to fill your job, so you can’t sell them on how you lived.
- Investors like things customized. When an investor approaches a business, they have a specific acquisition criterion. This means they’re looking for a very specific set of attributes from your company. You can’t sell them what you have – you need to sell them what they want.
If you’ve achieved the lifestyle you want, I’m happy for you. But if you want to sell your business, remember that an investor isn’t buying your life. They’re buying your company. Make sure you understand the difference before you put up that “For Sale” sign.
(Photo by humancapitalinstitute)
To read about mistakes to avoid when selling your printing business, download, Rock LaManna’s “12 Code Red Seller Mistakes.”
Rock LaManna provides executive coaching for printing owners looking to grow their printing business, merge with a synergistic partner, make a strategic acquisition, or create a succession plan.