When Randy Smith started his own business at 28 years old, he truly set out on his own: with no partners and no investors. What he envisioned with his point-of-sale technology company, he achieved. Now, at 53, Smith has sold his company and successfully retired. We asked him to share some of the smart moves and tough lessons that led to a successful exit strategy.
Smith built his business on the experience he gained working 7 years for a Fortune 500 company. While he originally sold business machines (cash registers), the business evolved quickly into a software and technology company selling point-of-sale systems and software to restaurants and bars. By the time he sold his business to a Fortune 500 company two years ago, it had grown to include two office locations— one in San Antonio and one in Las Vegas—and 35 employees.
It’s an achievement that many business owners desire but few attain. So what does Smith consider to be the most important piece of advice?
“Start planning today to sell your business if you ever intend to do so,” he says. “Selling a business is not like selling a house. There are a limited number of buyers to buy your specific operation, and you need to be ready to take action when the opportunity presents itself. Once the opportunity to sell begins, you will have a multitude of tasks and decisions to deal with, so deal with the details in advance. Even if you never sell, you will do yourself and your family a favor by getting organized.”
To plan accordingly, he offers the following six tips:
1. Join a peer group. When Smith joined The Alternative Board, the facilitated, monthly meetings gave him access to other similar business owners in a way that changed his exit strategy for the better. “Learning from their shared experiences helped me both grow my business and validate my ideas,” he says.
2. Find a trusted advisor—such as a business coach—and meet regularly. “Most small business owners are only accountable to themselves,” Smith points out. “If you plan to sell your business someday, you will need to be accountable to the buyer. A business coach can help get you there.”
3. Get your financial house in order. Most small businesses, including Smith’s, have a mix of personal and business funds intertwined. “No buyer wants to see or sort through this,” says Smith. He learned to set up his business as a business, not a personal venture. “If you have no other partners, you can still take advantage of many personal perks, but you will be ready to take action when you need to.” This also may require that you structure or restructure your corporate entities to improve tax advantages.
4. Turn losses into gains. Unwanted non-business assets can be troubling for both buyers and sellers. “Before working with Steven Bankler, I had excessive amounts of invested assets that were subject to potential creditor claims and double taxation,” Smith says. “Steven helped me restructure my assets and save in taxes to the extent that his service not only paid for itself, but the assets became another source of profit.
5. Set your business up so that it can operate without you. Yes, you are important, asserts Smith, “but the value of the business is much greater to someone else if you’re not the only salesman, technician, programmer, engineer, etc. in the business.”
6. Understand the true value of your business. “I have friends who own businesses who have no idea what the ‘market’ value of their company is,” Smith says. “They tend to inflate the value based on what the business is personally worth to them. If you receive an offer, you need to know in advance if it is reasonable or not.”
7. Decide in advance to sell if the opportunity presents itself. The buyer may turn to other opportunities if you get caught up in your own interpersonal debate. “I was fortunate to have good professional advice and put a plan in place six years in advance of actually receiving an offer,” he points out. “I could not have done this on my own, so the time and money spent upfront were worth every penny.”
Once his sale was all said and done, the mostly smooth transition had one major bump Smith didn’t expect: The emotional toll of retiring from his business.
“For me, the more difficult part of the exit has been after the sale,” he confesses. “Letting go of your ‘baby’ is not an easy thing to do because my entire identity was tied to the business. Becoming retired instead of being ‘the man’ is not an easy thing to do. If you have built a long relationship with customers and communicated with them often, being disconnected will feel awkward.”
Having the other details in place beforehand allowed him to focus less on the logistics and more on readjusting to life outside of business ownership.
Copyright: alphaspirit / 123RF Stock Photo
