Thinking of Selling Your Business? There will be a “Day of Reckoning” …

When a business owner first decides they want to sell their business, they often face a 'day of reckoning' when the valuation comes in ... (but it's not as ominous as it sounds)

​When a business needs to change, either because of changing conditions outside the company (competitive pressure, technological innovations), or because of changing conditions inside the company (owner wants to retire, investors want to sell out, a partner wants a buyout), they are going to inevitably face a day of reckoning.

How much is this company really worth? How do we take what we currently have and make it better, sellable, more profitable, or even prevent it from continuing a downward path?

/ˈrek(ə)niNG/
noun

1. the action or process of calculating or estimating something.

Reckoning. The word sounds so ominous and biblical. But it just means to calculate or estimate something. And the first step, when you decide to sell or first consider selling, is to have a valuation done - hire an expert in business valuation to give you an outside, unbiased estimate of your company’s value.

Your day of reckoning may actually turn out to be quite pleasant. Alf Sanderson, Hume Chalk’s business valuation expert, can tell you multiple stories of his valuations coming in much higher than the owner expected, or revealing previously overlooked assets that could be strategically included in the final sale.

Or, the final valuation may end up less than you hoped, for many reasons - maybe the market has just turned downward, maybe businesses like yours are facing a ‘buyer’s market’ as more and more are listed for sale (this is going to happen at a rapidly accelerating pace as baby-boomers age out and start to sell over the next 3-5 years), and maybe there are some real problems going on inside your business that you’ve been ignoring.

An unexpectedly low valuation can be painful. It places you, as the business owner, in a tough decision point.

Where do you go from here? What do you do now?

One thing that cannot be over-emphasized is not to bury your head in the sand.

And while our entire company is built on the concept of possibilities and opportunities, we do not condone ignoring the truth or pretending everything is ok when it’s not.

Here’ are a few "patterns of denial" we've witnessed when a business owner is struggling and facing bad news:

1. They go into “hope and pray” mode - they hope and pray that if they just keep plugging along, work a little harder, things will turn around or someone with deep pockets will suddenly show up and rescue them.
   
   
2. They get “busy” with some new project that will miraculously save the day. Business owners and entrepreneurs are often innovative, big thinkers. They think the ‘next big thing’ or latest trend in their industry will turn things around for them.
   
   
3. They get mad and start blaming other people, trying to pinpoint the one thing, person, or situation that is at fault for the bad news. They often fire someone or dump a product line or change a computer system, assuming that one thing is the problem, and as soon as they fix that, the situation will change and they will become more profitable.
   
   

The problem with any of these options is that they rarely work.

Think of turning around a large ship that is heading off course. Do you just run the engines a bit harder? Do you start designing some fancy new navigation technology? Do you dump a few items overboard?

No, you don’t. You start making course corrections. You look carefully at your current navigation and find out what might be dragging you off course. You make better decisions. You ask for ‘all hands on deck’ and get your whole crew focused on the correct end point (and make sure they all know where it is).

A captain facing a storm knows enough not to simply ‘hope and pray’ the weather will change in his favour. He doesn’t start tinkering with the equipment or throwing people overboard. He assumes the storm is going to be a tough one, and starts leading the crew through the storm. Sure, they may have to batten down the hatches, get every hand on deck, and even repair a few leaks, but the focus is intense and unrelenting. They get that ship going where it needs to go at the fastest, safest speed it can.

It takes guts and it takes leadership.

At Hume Chalk, we often call ourselves your pilot boat, steering the ship through rough waters. There is absolutely a need for outside guidance, for ‘pilot boat”- like allies to help you understand what course corrections are necessary, or “lighthouses” - people that are able to point out where the rocks are hidden and where you might run aground if you’re not careful.

But, ultimately you are the captain of your ship, the master of your fate.

If you want to sell your company, get a valuation, and look at the numbers. If they aren’t what you’d like, you are going to be at a decision point.

There is no going back from a day of reckoning - no burying your head in the sand or getting busy, mad, or distracted.

When every decision counts, make choices with your eyes wide open, in full awareness.

You either decide to sell the business at its current valuation, or you decide to course correct with the support of your team firing at full speed, and strategically make whatever changes are necessary to get to the desired destination.  

Contact us today to get that initial valuation done, or for help steering your ship in a new direction. 

Diane Currie Sam has worked for over 25 years across multiple industries to help her clients to initiate massive growth in their businesses, secure millions of dollars in funding and sales contracts, and initiate change through the power of strategic storytelling. She is the founder/CEO of “Be a Better Story” business services, and contributing columnist for Inc. Magazine.  She has a Bachelor's of Science degree from the University of BC and a Masters of Arts in psychology from Trinity Western University.  ​

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