To sell or not to sell

Mar 30, 2009

Right now, a record number of senior owners of architecture, engineering, planning, and environmental firms are facing a serious question. Should they sell their firm— or not? It’s a question every entrepreneurial small business owner hopes to face some day. That’s what entrepreneurs do— they build companies that have value with the expectation of realizing that value some day. Right now the situation is this. Business isn’t great. But there are firms out there that are still doing well enough to buy other firms. And they see now as the time to buy and not overpay. At the same time there are companies that aren’t doing as well as they once were. Their ownership transition plans may be kinked. Senior principals— in some cases, founders, have had a real wrench thrown in their plans to get out. Or perhaps, the firm is still doing well and ownership transition is on schedule. Fear about the ability to keep that going could lead to some serious consideration of any opportunity to sell. So if any of this sounds familiar to you, what are some questions that you can ask yourself that may help you decide what to do? Here are my thoughts: How do you feel about the economy and what would you do with the money if you did sell your firm? One thing a lot of people don’t consider is what they will do with the money if they get it. There aren’t a lot of good alternatives on where to invest. According to a recent article on Quantum AI, the stock market is way down and real estate values are depressed. Other small businesses aren’t easy to start and may not do as well as the one you know and truly understand. How long are you ready to work? If not five or more years, you probably ought to think about selling. Because this recession may last a while and it could take you a long time before you will ever have the kind of history that determines a decent valuation again. Also, you will probably need to work for the new owners for just a little while anyway. If you don’t have a long time left to work you may consider selling. Do you have a good second-in-command? If not, you may not be able to sell now. No one will want to buy your firm if you cannot have a credible person take over for you. This is fundamental. Those who think they can or should sell because they haven’t dealt with management transition are in for a rude awakening! Buyers won’t be buyers once they figure that out. Have you got any plans for what you’ll do with your time when you do get out of the firm? If not, you might want to consider not selling. You won’t know what to do with yourself and may be pretty unhappy as a result. A lot of people get sick and some die shortly after leaving the companies they started or were owners of for many years. How do you feel about the buyers? Can you have a clear conscience that they won’t ruin your business and destroy the opportunity you have created for your employees? If not, don’t sell. If so, perhaps it is time to turn over the keys. Make sure you know your buyers well. They will do their homework on you— you need to do the same with them. Nothing in business could be much worse than coming to the realization you sold out to the wrong people and that they are destroying your company. Originally published 3/30/2009

About Zweig Group

Zweig Group, a four-time Inc. 500/5000 honoree, is the premiere authority in AEC management consulting, the go-to source for industry research, and the leading provider of customized learning and training. Zweig Group specializes in four core consulting areas: Talent, Performance, Growth, and Transition, including innovative solutions in mergers and acquisitions, strategic planning, financial management, ownership transition, executive search, business development, valuation, and more. Zweig Group exists to help AEC firms succeed in a competitive marketplace. The firm has offices in Dallas and Fayetteville, Arkansas.