Preparing Your Family-Owned Business for Sale? – Kiplinger’s Personal Finance

At CG Capital, we have met with many individuals who own businesses and often discover as these individuals approach the finish line to sell or exit their company, the fire in their bellies that got them to where they are has faded over time, which in many cases can damage the enterprise value of their business. 

Certainly, we understand and empathize with the fact that everyday challenges of running a business are demanding and at times can wear you out.  We’ve certainly seen it with several construction business owners we’ve worked with. Securing bids, managing your team onsite as well as in the office, adapting to new regulations, reconfiguring your day due to delays, supply restraints and inevitable unplanned circumstances can be daunting.  It takes resilience to run your business over the course of a given day.  So, it comes as no surprise that when the time comes to sell your business, one can easily take their eyes off of their target.   

My own experience with a business sale

In the fall of 2000, I received a great life lesson about exit planning and succession that relates to having your “house in good order.” My prior broker-dealer at the time sold its investment banking division for approximately $2 billion in cash and about $1 billion in stock of the acquiring firm.  I was shocked to read that morning’s headlines announcing the sale.  Initially, my thinking was “WHY?”  Why in the world would anyone, especially in our industry, sell the very house that provided key investment research and trading efficiencies? 

It was not until later that day, upon listening to a senior partner of the firm explain their rationale for the sale, that the whole turn of events made clear sense. 

To start, the senior partner explained he ran and managed each division of the enterprise like the most beautiful house on the block.  Keen attention and focus were expected to be followed by each member of every division; metrics were measured regularly in each category; and a careful watch was required on the industry as a whole.  Staying ahead of industry trends, maintaining efficiency with technology, and keeping positive morale and team culture kept our business valuations at the top end of the industry. 

Metaphorically speaking, each division was a “house,” and we wanted our house to attract home shoppers’ attention. Therefore, the interior and exterior were kept in pristine condition. Keeping with the house analogy, in the event someone is driving by and happens to want what we have, and an offer is made, the owner must give it serious consideration.  In the instance of our investment banking division, our buyer was willing to pay a multiple of four times …….


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