Are You Stealing From Yourself?

Steps to Selling your Business Part 9.

An old friend once said something to me that I’ve never forgotten. It was a single sentence that immediately became part of my arsenal of practical wisdom.

My friend is an accountant; at one point, he bought another accountant’s practice. This accountant had been struggling financially for 20 years. My friend took a long look at the books, as you do with a new acquisition, and soon saw the reason for the man’s difficulties.

For his entire career, this accountant had been severely underpricing his services. He should have been charging $200 an hour; however, he only charged $100.

My friend said to me, “Doug, do you know what that man did? For 20 years, he stole from his family.”

He was right. We all know that the stress and the personal cost of doing business doesn’t end when you go home for the night. Your spouse and family have made as many sacrifices as you have; they deserve to be rewarded for that. Perhaps you could defend robbing yourself, although I’m doubtful you’d convince me. However, stealing from the people who have supported you through it all and not getting everything you can for them – to me, that’s indefensible.

I took what my friend said to heart. I cannot exaggerate the impact that sentence has had on our firm. It’s a principle that guides our practice at Stillwater. 

We recently heard from a company that they sold their business for $5 million to a buyer who knocked on their door. Eighteen months later, that group sold the company to a private equity firm for double the initial selling price. I was disheartened to hear their story because the original owner essentially gave his buyer a $5 million gift without even knowing it. 

My friend’s story applies to your business too. At all costs, we must bring your company’s complete value into focus for potential buyers and optimize conditions for the best possible outcome, which takes experience and expertise. It’s tricky work, but the alternative is disastrous. 

If you don’t do all the work you can, work with the best Advisors, and you sell your company for less than you should; you are essentially stealing from yourself and your family.

How do you prevent that from happening? Partner with expert Advisors and make sure they know how to identify value drivers and bring them into plain sight for the market to see. 

Every sale is different, of course, and there are good reasons people might sell their company for less than the best price. You might sell to a loyal employee with a shared history at a discount, for example. However, those should be thoughtful, intentional exceptions to our principle, and you should know with clarity the amount of that discount.

In most cases, if a seller walks away from a deal with money left on the table, it’s because either they have not engaged an M&A Advisor, or they have engaged the wrong one.

I’m grateful for that chance conversation with my friend and the sentence I will never forget: “Doug, that man stole from his family for 20 years.” We’ve coded the wisdom in that story into the DNA of Stillwater Capital. I’m sincerely proud of that. Every time we start working with a new seller, we think about it, making your company’s sale about more than just money. 

At Stillwater, getting the best possible sale price based on your business’s best-presented story isn’t just a cold business mechanic. I find real meaning in the work that I do, and a big part of that is knowing that I am helping people do right for the people they love. To me, that means it’s not just work; it’s great work.

If you are planning to divest your business, or have questions for one of our Advisors, please contact our team today.

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Written by: Douglas Nix