We know founders just starting their companies and others who have built up their businesses over decades. Most everyone thinks about selling. Maybe not today, but one day in the future they’ll be ready to turn their business over to another and start their next chapter. Selling your business, your baby you built from nothing, is a very personal and exciting decision. Founders want to sell for many different reasons. They want to retire on a beach, start a new project, and spend more time with family and hobbies with weight off their shoulders.
Selling your company is a great thing. It means you hustled for years building something so valuable someone is willing to pay a great sum of money for it that changes you and your family’s lives, sometimes for several generations. You can turn the keys of your baby over to a good steward and enjoy the fruits of hard work. The legacy you worked hard to build can last and continue to support your customers, employees, and community. If you’ve built a true business, built on a strong mission and values, with a strong team of people, then selling to someone with similar values continues your vision with the next generation of leaders.
Most founders want to sell so they can retire, take chips off the table, or start on their next project. Thoughts of selling lead to deep, personal, and thought provoking conversations we happen to enjoy immensely. What do you want to do next? What causes and charities are you passionate about that you can make a great impact on? Is there a hobby, trip, or side project you’ve wanted to do for a long time but never could while running your business? Is there extended family, perhaps grandkids, you want to spend more time with? What do you want to be doing in three years? Do you care who buys your company and what happens afterward? How do we keep your legacy alive in the company after the sale?
We are blessed with clients who’ve sold for all the right reasons, but we’ve heard stories of founders selling for reasons that would give any of us pause. For some founders, the driving reason for a sale is to become rich. Many founders, some of our clients included, do in fact become quite wealthy from selling their companies. But it isn’t always true. In many cases, a founder’s lifetime earnings and net worth will actually be greater if they don’t sell their business.
We’ve heard other founders think of selling because they don’t like the business for whatever reason. But if they don’t like the business, a buyer will eventually come to the same conclusion and ask for a large discount on the purchase price. Companies with declining revenue, key employee turnover, on the backend of the industry cycle, or with deteriorating economics are simply more risky than growing, or even stable businesses.
But all companies are messy, even the great ones. Every entrepreneur knows there is room for growth and improvement in their company and they can be the driver of that change. So how can we prepare your business for a sale down the road? What do buyers of companies like yours want? A talented team, customers who love your business, and strong values and culture make your company more attractive to buyers. Additionally, how can we preserve the legacy you’ve created at your company and make it endurable for future owners? This work takes time, entrepreneurship is a game of patience, and it’s the difference between a founder leaving with a small nest egg and becoming rich.
Whatever your thoughts are, if you want someone to discuss with, our door is always open. We love being a part of these discussions, it’s a core reason for us starting Pilot in the first place. Our experience comes from having journeyed on this firewalk ourselves and having joined many of our clients over the years as they navigate this challenging, yet very rewarding path. We thoroughly enjoy accompanying our friends and clients on this journey and would love to continue the conversation and hear your thoughts.
Pilot Notes
Berkshire Hathaway streamed their annual meeting earlier this month and Tren Griffin wrote a great thread on Twitter summarizing the key points.
Permanent Equity wrote a book called The Messy Marketplace to share their thoughts on owners selling their business and made a podcast version. In this episode, Brent Beshore and Emily Holdman talk about motivations for selling your business.
Scott Miller, fund manager of Greenhaven Road Capital, wrote his Q1 letter and shared his thoughts on portfolio companies and markets.
Chenmark Capital wrote about how they are trying to stay focused through the crisis.
Tim Ludwig on Twitter wrote about the best company culture he’s ever seen and the use of debt in an acquisition.
If you know anyone who might enjoy reading our thoughts around business owners and interesting resources we come across, feel free to forward this along to them so we can keep them in the loop as well.
Additionally, if you come across an interesting article, interview, podcast, or Tweet, please send it over to us. We are always buyers of quality information.