When another locally owned store abruptly closed its doors, my initial reaction was “Another small business bites the dust.” Was I ever wrong. A closer look behind the headline demonstrates three real-life lessons in developing “The Perfect Exit Strategy.”
Lesson No. 1: Go Out on Top. Although this business was reportedly successful, the owners decided to go out on top. As one of the owners said: “They were all excellent stores. We sold out not because we weren’t successful but because we were extremely successful.”
Lesson No. 2: Sell to One of the “Big Boys”. Today many small-business owners who are lucky enough to sell their businesses are often forced to sell to local competitors, to their management or to a newbie who has enough capital to close the sale. Unfortunately, the prices paid by those purchasers will likely range from OK to less than OK. However, this particular business was sold to a mega-business in the same industry that obviously wanted to buy market share. Given that, I’d be willing to bet that the sale price was a whole lot better than OK.
Lesson No. 3: Timing Is Everything. While it’s always difficult to time any market, you should always be aware of overall sale trends in your own industry. In this particular situation, not only was the business obviously “on top” from a financial standpoint, but the owners’ timing was excellent. Why? It turns out that the “big boys” in that industry are currently competing against each other to snap up small, local competitors.
Chris Kelleher (Kelleher@TheLawFirmForBusinesses.com) is the founder and president of The Law Firm For Businesses PC.