Strategy: Exit the Stage Right
Selling a catalog business can be an emotional decision. Owners often have an inflated view of what their businesses are worth. So arriving at a realistic price tag can be difficult.
The old adage “For every seller there’s a buyer” certainly holds true. But finding the right buyer for your business — someone willing to pay your asking price — isn’t always easy.
While we at Lett Direct aren’t investment bankers or business brokers, I’ll share with you what we’ve learned during the years from working with catalog business owners wanting to sell their companies.
Timing is Everything
Knowing when to sell your business is directly related to the amount you’ll ultimately get for it. In my experience, most entrepreneurs wait too long to sell. Emotions kick in, and the best time to sell passes. Economic conditions change, or the profit picture changes, decreasing what the business is worth.
A good time to sell is when your business can report three solid years of profitability. It’s not necessarily the dollar amount of profit or percentage of net income from one year to the next that’s important, but rather the consistency of the numbers over time. For example, is business trending up or down, and is the financial performance consistent from one year to the next?
Define the Prospective Buyer Type
Buyers fall into two categories: strategic and financial. Strategic buyers generally will pay more for a business, because they can recast the income statement by leveraging existing overhead structure, (e.g., just one building to rent). Financial buyers care only about growth and profit, so they can sell the business in three to five years for a nice gain on investment.
If yours is a small catalog business with limited or no profits to report, finding a strategic buyer is the way to go. You’ll waste your time looking for a financial buyer.