Against all odds, twenty years ago today, I sold my business. Having owned the agency for seven years it was time to sell. My family was growing and with a third child on the way the decision was easy.
People tell me I was lucky.
Lucky that I sold my travel agency when I did. The year was 1999, only a few months before the much anticipated Y2K. Less than two years before the tragedy of 9-11 and within three years of the first outbreak of SARS which halted most international travel.
Owning the business was becoming more difficult for other reasons as well. Two years prior, in 1997, the airlines capped our commission resulting in a seventy percent drop in gross revenue. That one action alone resulted in 39% of all travel agencies closing their doors
Looking back, it is no wonder there are so few bricks and mortar travel agencies around.
Yes, I was lucky. And with most luck there was a huge dose of strategic planning and thoughtful action that went into selling that company.
Against all odds, at a time you couldn’t give a travel agency away, there were three things that helped me sell that business;
- I spent 95% of my time working ON the business not IN it
- I understood my numbers and stayed profitable
- Our systems were solid and documented.
Do these three things and you will have the best chance at selling your business when you are ready.
Let’s look at how this worked to sell a travel agency in 1999.
Do Strategic Work
Even though I was a great travel agent and could outsell any of my agents, I stopped selling. I did this so that I could spend most of my time creating a business that ran independent of me. Working on strategy ultimately proved to be way more valuable than selling another cruise.
I had stopped working IN my business so that I could focus full time ON my business.
Working on my business meant spending the majority of my time working strategically. This was hard for someone like me who loved selling travel. It is hard for most of the small business owners we work with as well. They are good at their trade and maybe not as good at business.
The most valuable activity I did to create a sellable business was to consistently work on my business every day.
Working strategically meant spending time thinking, planning and organizing. Reading business books, going to training seminars and participating in trade groups and events all helped me build a stronger company.
What set my business apart from all the other agencies was that as the owner I didn’t work as a travel agent in the business. I didn’t have to and the new owner would not have to either to keep the same revenue. I sold my business because it was the ONLY agency where the owner wasn’t the top selling travel agent.
Think about that in your own company. What value would your business have without you working in it?
To sell your business you need to find a way to extract yourself from being the hardest working, highest producing employee.
The second things you need to do to be able to sell your business is to understand your numbers. This is the only way you will know if the work you are doing is resulting in a profit.
You can sell a profitable business. It is challenging to sell a business that is losing money
Knowing our numbers gave me the power to make good business decisions. It gave me the information I needed to effectively negotiate with our suppliers, to create winning relationships with my team and told me when I needed to push a little harder on the marketing gas pedal.
Small decisions in a small business can have a HUGE effect on profitability.
- A five percent discount to a loyal customer might make them happy for the moment but over time could put you in the red.
- A one dollar an hour raise for one employee is equivalent to Twenty five hundred extra dollar a year cost.
- Writing off the toilet paper you take home sounds innocent enough, except it reduces your profitability and that minuscule tax savings will cost you way more later when you try to sell.
When you go to sell your business the only real report card you have is your financials. You need to know your numbers and work towards profitability every month.
A prospective buyer will be looking at every line item on your income statement and balance sheet. They will be looking to see where they can get paid and pay back any loans they take out to buy the business.
Let’s say you are not paying yourself a fair market wage for the work you do in your business. Your excuse is that you want to keep the money in the company. You say you don’t need it right now or worse, you are not profitable enough to pay yourself fairly. Think about the very awkward conversation you will have convincing a prospective buyer that they too will get to work for free if they buy your business!
Take time now before you put up the for sale sign on your business to learn your numbers, increase your own pay to an amount that is sustainable and make what ever changes you need to make to be profitable. When the finances look good, the business has a higher value and someone will want to buy it.
Even a little profit goes a long way
The third and maybe the most important strategy for selling your business is documentation. Your systems manual when fully completed could be worth an additional forty to fifty thousand dollars.
Think about it. What happens the day you sell your company and walk out that door if you have not written anything down? You take all that knowledge with you!
The new owner better have everything you know about running the business documented or they will fail.
What a great selling proposition to a prospective buyer that they get the business AND the manual on how to successfully run it.
The process of documenting your systems is also a great way to get the bugs out before you sell. Imagine, going through your key service standards and making sure everyone on the team is following them. That alone could increase the value of the business with happier customers, more consistent sales and a team proud of their work.
Don’t wait until you are ready to sell. Systematizing your business will take you on average 18 months to fully document and test each process with the help of a coach, longer doing it on your own.
I sold my business at a time you couldn’t give a travel agency away. You can sell your business too. Getting it ready for sale may mean doing things differently.
We have a system for that!
Join our 2020 Cohort of Organized & Profitable, starts February 6, 2020. In 10 months you will have a more valuable, more sellable business.
You don’t have to do this alone. A small investment of your time now can lead to a HUGE return on your investment when you sell your business!