Blue Elevator Blog

Know Your Number

Only God knows.  You never know when someone might offer you an unexpected sum to buy your business or organization.

Would you sell it?  Would you keep it?

Many moons ago, I learned of someone who was offered an untold amount to buy his business.  It was a large sum.

The offer would be passed up.  And many years later, the M & A (mergers & acquisitions) market would not be friendly to the industry.

Should the person have sold when he had the opportunity?  That is an interesting question.

What Is The Lesson?

If you are the leader of your organization, be encouraged to think about such things.

Specifically, “What amount of money would I accept to sell the organization?”

There are many questions to consider:

• Could the principal(s) sell the business and start another business?
• Would the principal(s) be allowed to continue operating the same business?
• Could the principal(s) live with someone else (e.g., the buyer) making the key decisions?

There are many different qualitative variables to consider.  But, for this article, I would encourage you to think quantitatively.

Specifically, “What amount of money would I accept to sell the organization?”

What Would It Take?

So, what would it take for you to part with your business?  The reason I would have you evaluate this is important.

Often times, opportunity knocks when we least expect it.  And, as opportunities go, they often arrive unannounced.  And they depart fairly quickly.  You may have a small window of time to make a decision.  So, be prepared.

Opportunity Lost

In my experience, most principals become interested in selling when they become burned out.  Or, when the business is performing poorly.  What is a poorly-performing business worth?  Not a lot.  Will a burned out business owner command a high price?  No.  They say, a bear in the wild can smell fear.  The same can be said of savvy buyers approached by desperate owners trying to sell off their headaches.

But again, this article is not about how to put lipstick on a pig.  It’s about being prepared for the unthinkable.

Know Your Number

In our article, Selling a Business, we introduced the acquisition criteria made public by Warren Buffet, CEO of Berkshire Hathaway.  You can read the article, but we will focus on an important question.  And we will quote the last criterion here:

An offering price (we don’t want to waste our time or that of the seller by talking, even preliminarily, about a transaction when price is unknown).

Warren Buffet is interested in buying quality companies.  But, alas, no deal can be had unless and until the principal(s) of the organization have an idea as to what he/they would accept.

So, our advice is to know your number – so if opportunity knocks, you’ll be prepared.  Prepared to sell or prepared to walk away.  But either way, you will have the confidence knowing you’re prepared to entertain what would, otherwise, have been an unanticipated question.

“What amount of money would you accept to sell the organization?”

Know your number!  Contact us!