A Business Owners Toughest Decision is deciding to sell. In many cases he ignores some market dynamics that foretell difficult times ahead. Those difficult times often result in a significant drop in the value of the business. This article will help you identify some of those signs.

For the past 12 years you have built your business. Your company has become part of your identity. Even when you are not at work, you are working, thinking, planning. You never stop. If you sell you are leaving behind much more than a job. In this article we will discuss some signs that might indicate that it is time to exit your business.

1. Late in your working life you are faced with a major capital requirement in order for your company to maintain its competitive position.

2. A large competitor is taking market share away from you at an accelerating pace.

3. Your legacy systems or competitive advantage has been "leap frogged" by a smaller, nimble, entrepreneurial firm.

4. A major company in a related industry just acquired a direct competitor.

5. Your fire to compete at your top level is not burning as brightly as it once did.

6. Your kids are not interested or are not capable of running the business.

7. You have had a health scare and have decided to smell the flowers.

8. You have lost a major client of a key employee.

9. The market is hot and you decide to take some chips off the table for asset diversification.

10. You exit in an orderly fashion and from a position of strength as you intended.

Let's look at these in a little more detail.

Major Capital Investment Required - You are supposed to be diversifying your assets, not concentrating them even further. Think about a simple payback analysis. Does that extend beyond your retirement date? You want to be able to defend that investment with the energy and intensity you devoted when you were originally growing your business. Maybe it is time to bring in an equity partner with smart money, an industry buyer with the management depth, infrastructure, or distribution network to protect that investment. You might consider selling out with a three year employment contract. Let the new owner defend the required capital investment.

A Large Competitor is Taking Market Share Away from You - Believe me, the news is not going to get better. As an investor you would probably sell the stock in a company you owned if Microsoft or GE decided to assume a presence in that market. Business owners often struggle with objectivity when a similar event takes place in their own company's industry.

Your Legacy Systems have been "Leap Frogged" by a Nimble Entrepreneurial Firm - This happens all the time and can cause an erosion of your customer base. Your inertia will sustain you for a while, but eventually you will begin to experience customer defections. You can rewrite, acquire or sell. If you decide to sell, do so before losing too many clients.

A giant company in a related industry just acquired one of your major competitors. Watch out, they did not make this acquisition to maintain status quo. They want to grow their market share. They will be coming after your clients. The good news is that as a defensive measure, one or more of their competitors will be compelled to make a similar acquisition. It is best to be aggressively ahead of the curve and get acquired while the market is hot and prices are being bid upwards.

Your interest and competitive fire is eroding. Let's face it, if you are not growing, you most likely are contracting. Your competition was tough when you were on your game. Your family's net worth is under attack if you are no longer fully committed.

Your original plan was to turn your business over to your children. They may not be interested or capable of competing at this level. Perhaps the greatest legacy you can leave to your kids is to convert your company into a diversified portfolio of financial assets that are far less risky than turning the company over to inexperienced managers.

You have a health scare and all of a sudden you start thinking of all the sacrifices you made and all the things you want to do before it is too late. Your list of goals is immediately changed from financial in nature to family, friends, travel, experiences, philanthropy, etc. You might want to listen to your heart this time.

You have lost a major client or a key employee. That can be a real blow to a business. The owner, by nature, is optimistic and believes that the lost business will soon be replaced and does not ratchet down the expense level to match this new sales level. If he does cut, inevitably, it is not fast enough and not deep enough. Maybe it is time to seek a buyer that could replace that business before your company's value is severely impaired as your profits erode.

The market is hot and you decide to take some chips off the table for diversification. You may be thinking of retiring in four years, but a consolidation is occurring in your industry and valuations are up 20%. Sell at the top and sign a four year employment or consulting contract. The odds are that if you exit on your original schedule, valuations will have settled back down to the norm.

You ring the bell and exit on your own terms, from a position of strength, exactly like you planned. You are well aware of the competitive forces in the market and the relative strength or weakness in valuation multiples. You have prepared your business to be attractive to a strategic buyer. Everything is going your way. You hire a good M&A advisory firm to present you confidentially to the most likely buyers. Several recognize your value and show interest. You are able to get a little competitive bidding going. Your transaction value rises and your terms improve. You pull the trigger and complete the sale. Mission Accomplished.

Thanks for reading! If you know someone who could benefit from this, feel free to forward it to them! Not a subscriber yet? Like what you've read? Sign up to get future issues delivered straight to you: SUBSCRIBE

Until next time!

Dave Kauppi is the author of "Selling Your Software Company - an Insider's Guide to Achieving Strategic Value, editor of The Exit Strategist Newsletter, a Merger and Acquisition Advisor and President of MidMarket Capital, Inc. MMC is a private investment banking and business broker firm specializing in providing corporate finance and business intermediary services to entrepreneurs and middle market corporate clients in a variety of industries. The firm counsels clients in the areas of merger and acquisition and divestitures, achieving strategic value, deal structure and terms, competitive negotiations, and Letter of Intent Consulting. Dave is a Certified Business Intermediary (CBI), is a registered financial services advisor representative and securities agent with a Series 63 license. Dave graduated with a degree in finance from the Wharton School of Business, University of Pennsylvania. For more information or a free consultation please contact Dave Kauppi at (269)231-5772, email Dave Kauppi or visit our Web page MidMarket CapitalClick Here For Our New Book on Amazon

MidMarket Capital
Technology Focused Investment Banking
Direct (269) 231-5772

Check Out Our New Book on Amazon

Selling your Software Company - An Insider's Guide to Achieving Strategic Value

46102 Royal Avenue
Grand Beach Michigan 49117

Unsubscribe   |   Change Subscriber Options

Older messages

Selling an Information Technology Business - New Rules for Merger and Acquisition Success

Saturday, April 30, 2022

THE EXIT STRATEGIST Selling an Information Technology Business - New Rules for Merger and Acquisition Success If you are a business owner considering selling your business, most likely you will

A New EBITDA Adjustment to Drive Business Selling Price (a short video)

Monday, April 18, 2022

THE EXIT STRATEGIST A New EBITDA Adjustment to Drive Business Selling Price (a short video) Click Here to Watch Our Short Video The Key to driving strategic value in the sale of a technology company is

A Business Valuation May Not Accurately Reflect a Software Company's Value

Monday, April 4, 2022

TECHNOLOGY ENTREPRENEURS - EXIT OPTIONS Business Valuation May Not Accurately Reflect a Software Company's Value I can't tell you the number of times I have talked with owners of software

Experience Trumps Smarts in the Sale of Your InformationTechnology Company

Friday, March 25, 2022

THE EXIT STRATEGIST Experience Trumps Smarts in the Sale of Your Information Technology Company People who start software and information technology companies are generally very smart people. When it

Bridging the Valuation Gap between Business Seller and Business Buyer

Tuesday, March 15, 2022

THE EXIT STRATEGIST Bridging the Valuation Gap between Business Seller and Business Buyer In an earlier article we discussed a survey that we did with the Business Broker and the Merger and Acquisition

Ongly Remengesau, Palauan Scholar

Monday, May 23, 2022

Micronesian Monday Feature ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

Reader, exciting announcement...

Monday, May 23, 2022

You've likely heard about NFTs and Web 3.0 a lot over the last few months. And if you find it all very confusing, you are not alone! Your friends at Social Media Examiner are here to help.

May 23 - EBay and Hollister's Social Tourist brand both set to open pop-ups in LA

Monday, May 23, 2022

EBay to open sneaker pop-up in LA; Hasbro appoints chief people officer; Hollister to open a Social Tourist pop-up on Melrose in LA View online | Signup | Forward Retail Dive Daily Dive May​ 23,​ 2022

🤯 How to Make $2K a Month Part-Time in a Highly Competitive Niche

Monday, May 23, 2022

What Harry does to make $2k per month in the MMO niche from 2 hours of work a day and a free keyword research method, a reliable backlink partner, the anatomy of a rankable blog post, and more...

May 23 - Gucci opens gaming academy | TikTok allows brands to crowdsource content

Monday, May 23, 2022

TikTok's new ad product lets brands crowdsource content; Nextbite exec dishes on how operators can make virtual brands successful; Noodles & Co. gamifies mobile rewards to boost loyalty;

[Webinar] Stay ahead of the trends (and your competitors)!

Monday, May 23, 2022

Our team is sharing key findings from our 2022 Index report. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

VCs pull back from foodtech

Monday, May 23, 2022

Forecasting investor-protective deal terms; the end of an era for SoftBank; Caribou joins unicorn herd; Inceptor Bio bags $37M Read online | Don't want to receive these emails? Manage your

12 ways to boost Instagram reach without hashtags...

Monday, May 23, 2022

It's finally here, Reader—a new marketplace dedicated to social marketing services and support. If you're looking for a little extra help with a Facebook or Instagram project, look no further

A crash course in responsible addressable media

Monday, May 23, 2022

The future of addressable media is still being decided as the third-party cookie nears its end. Many of the proposed solutions by internet gatekeepers risk falling short when it comes to efficiency,

[EcomCrew Premium] Last chance to sign up for Premium

Monday, May 23, 2022

Registration closes in Hey Reader, Just dropping by to remind you that tonight is your last chance to join EcomCrew Premium for the quarter. We want to make sure all our members get way more than their