Issue link: https://www.e-digitaleditions.com/i/508347
14 FEDA News & Views What are the risks of not selling? Just as I have known sellers who didn't get all their money, I know several owners who waited too long to sell—and then missed a business cycle; or got into trouble; didn't see issues with their suppliers (which was devaluing their business); had health problems (which caused distress sales); suffered from key employees getting impatient, and leaving with part of the business; or simply let the business drift to the point where it was not worth what it might have been earlier. What are your foreseeable risks of not selling when you have or could have interested buyers? How healthy is your business? If your business is doing well (nicely profitable, good orga- nization, strong supplier relationships), that's a time to enjoy being in it and also potentially a time to get a higher price if you decide to sell. If your business is not healthy, it may be time to build a plan to get it healthy to sell in the next up cycle. If it's in real a crisis, you may need to sell to salvage what you have. How's your health? The personal health of the owner is an issue to consider in small to medium, closely-held distributorships, particularly where the owner is directly involved in day-to-day operations. If you have or foresee serious health problems, you may need to sell to allow focus on your health. However, if this is per- ceived by buyers as organizational weakness, you may need to appoint new management while you focus on health, or hire professionals to guide you in the selling process. How suscep- tible is your business to your personal health issues? I have known more than one business to fail or change ownership in a less than desirable situation due to the owner not being realistic about this situation. Another health question: How is the stress of the business affecting your health? What's your family situation? In most material handling distributorships, family issues and relationships play into the ownership and operation of the business and, ultimately, its sale. Family issues may include things like pressure from family to spend more time outside of the business, a desire to spend more time with family, a family member's health or other circumstances. This played into my situation. My parents and brother were dramatically affected by Katrina, which caused me to spend blocks of time outside the business. Time to help with aging parents can be an issue here. Are there family members waiting to take over? Are they ready? Will they ever be ready? What other opportunities do they have? Would they be better off with the money than the business? Will they resent it if they don't get a chance to run the business? How does this play with other family members? Divorce or a recent marriage also can play into business situ- ations quickly and dramatically. What business pressures/decisions/situations are you facing that may impact your decision to sell or not to sell now? What investments are being demanded by your suppliers, customers, or by business circumstances? Are they likely to pay off during your expected time in the business? A big issue here is the constant demand for investment in new technol- ogy—sometimes just to "stay in the game." Another key issue facing distributors is health insurance. Does your size or situation allow you to be competitive for employees while being cost-effective for your business? Is your dealership size becoming inappropriate for your part of the industry? In many industries, consolidation is or has taken place due to changing economies of scale. Pressures from suppliers who are changing their distribu- tion models has been another factor encouraging consolida- tion in some elements of the material handling industry. What's happening with your suppliers? In the material handling industry, the health and value of dis- tributorships is often impacted by the strength and actions of suppliers. In the sale of a distributorships, product lines don't automatically follow to new ownership. Suppliers have the alternative to decide whether their product line will go to new ownership. Yet, many purchase contracts stipulate the sale is contingent on key suppliers staying with the new owners. What is your relationship with your key suppliers? Do you have confidence in their direction? What is their competitive situation? What unilateral decisions are they making that is affecting the operation and value of your dealership? I have seen dealerships devalued quickly due to supplier decisions that were out of the hands of their distributors. Carefully con- sidering your suppliers' distribution strategies and tactics; their general business direction; their likely reaction to the timing of your decision to sell; their reaction to your intended purchaser are all critical. It is important to consider carefully when to involve key suppliers in your decision to sell. Opportunities presented by buyer? Outside the industry? Some owners have ideas and objectives for the growth and change of their business or their career, but do not have the capital, organization, scale, time or other ingredients needed to achieve them. The sale of the company to the right buyer might supply the needed ingredients. This, of course, assumes the seller feels comfortable in the new organization, and shares the vision of the future with the new owners. This can sometimes be achieved if the seller assumes a par- tial ownership role in the buying organization; sometimes sim- ply by joining the organization as a key manager. Or, there may be some opportunity outside of the business or industry that the seller wants to take advantage of but can't while "buried" in a current business. With the proceeds of the sale, and time freed up, he now may be able to actualize this opportunity. When to Sell continued continued on page 27