Selling your business can be an intimidating and overwhelming process. You’ve worked so hard for so many years, and now you are considering selling — and seeing your hard work and long hours benefit someone else. It’s a huge decision!
At some point, almost all business owners ponder whether to sell their business. For some, letting the next generation step in is a natural progression. For others, it may be best to stay the course (because the very thought of selling seems too overwhelming).
No matter which category best describes you, selling a business is a tough decision and requires a lot of preparation and work.
So, what are some questions you can ask yourself before starting the process? The following points can be helpful in the thought process:
1. Is it the right time?
- What will you do next? Would you like to step away from the business entirely, or were you hoping to work for the company that acquires your business?
- Are there other family members who could step in and continue your legacy?
- Are there other factors influencing your decision, such as your personal health or competition from other companies and/or other energy sources? Is the cost of running/funding your business too high? Is it getting harder to find and retain good employees?
- Are you able to continue to grow your business or has managing the business and its growth outpaced your skillset?
2. Should I try to sell on my own or hire a business consultant or broker?
This is a critical question. As a business owner, you certainly can contact a few local propane companies to see if they are interested in purchasing your business; however, will this be your best and most lucrative move?
Many business owners seek a business consultant or broker to help them prepare, list and sell their business. A reputable consultant or broker (C/B) will have experience in the propane industry to value your business correctly, speak the language and understand your business’s various revenue streams and critical metrics. In addition, a C/B will ensure the entire process stays confidential and will take time to collect essential documents and information, putting them into a format that a prospective buyer can access and review.
Most importantly, the C/B you select will be your biggest advocate. They will have many contacts in the propane industry and qualify numerous potential buyers to help you find the best partner/value for you. In addition, they will prepare your business in the most professional fashion possible to showcase it and excite a potential buyer about the opportunity to acquire your company.
3. What can I do today to help prepare my business for sale down the road?
- First and foremost, ensure that all necessary licenses and documents are in place and up to date. Are your customer agreements and tank ownership agreements current and signed? Do you have a solid lease in place for your plant location and office? Are all your driver files in compliance and up to date? Are you keeping up with margin management (passing along cost increases to your customer base)? Are you consistent with gas checks at each customer location?
- Resolve any pending litigation, safety or environmental compliance matters before you list your business.
- Many companies looking to acquire are interested in sales growth; therefore, keep up with adding new accounts at healthy margins. This demonstrates potential growth for developing the company, which can add value to your sale.
- Employee retention and training are also very important. Resist the temptation as a business owner to do everything yourself; potential buyers look for consistency and an appropriately trained staff with long-term stability and tenure within the company. Are you training one or two key employees to do what you do? If you are considering selling and not working for the new owner, you may want to ensure that someone else within your organization can take on many of your current functions.
4. If I hire a consultant or broker, how does the process work, and how long does it generally take?
Once you decide it’s time to sell your business, follow these steps to help you with the process:
- Hire the consultant or broker who you feel most comfortable with, who you believe will work the hardest for you and who most notably has the connections, experience and ability to help you secure the best fit and value for your company. This step usually entails executing a consultant or broker agreement.
- Work with your C/B to gather essential information that a potential buyer will need. At the same time, you will both conduct a comprehensive valuation to help you measure an anticipated value range versus the actual offer from prospective buyers as the process progresses. In addition, you will meet with your C/B at your location (after hours or on the weekend) for a physical walk-through if this hasn’t already happened.
- The C/B will typically send out general top-level info teasers (with no reference to your company) to gauge the level of interest from potential buyer candidates. Once candidates are identified, your C/B will qualify each one and work with you to identify those who should sign confidentiality agreements and receive more detailed packets. At the same time, the C/B will be preparing all essential data and creating a professional sales packet.
- Once qualified buyers receive the information/sales package, they typically have two to three weeks to analyze and respond with an offer or decide to exit the process. Once all bids are received, you and your C/B will meet to review each submission and weigh their pros and cons. You’ll then determine which bid makes the most sense for you, at which time the potential buyer will be notified and can begin the due diligence process. The non-winning proposals would also be notified and would typically remain as backup offers.
- The winning bidder’s due diligence process could take as much as one or two months. During this time, onsite, after-hours meetings will occur, and data review and deep-dive information gathering will take place.
- Finally, a closing date will be selected, lawyers and tax accountants will be hired and the parties — working together through the C/B — will gather and share all information required for a successful close.
While there are many more details involved in the process — as well as numerous variations — the steps above should provide a quick snapshot of the overall course of action. Hopefully, this has shed some light on some of the questions to ponder when deciding whether to sell your business and how the process may flow.
Remember: This could be one of the most critical financial decisions you ever make, so take time to think it through and select a team to help you maximize your potential earnings. This includes a tight group of family members or friends, a business transaction lawyer, a tax accountant and a consultant or broker with great connections and a deep understanding of the propane industry. Good luck!