Selling In Tough Times: 4 Basic Issues

We all know the best times to sell – a strong history of profitability, great cash flow, market dominance, a solid management team in place and no debt. However, it doesn’t always work that way. Sometimes owners are in a position where they have determined they must sell and the times are tough – the business is losing money, increasingly burdensome regulations are coming down, revenue is declining, the principal is in ill health, or there is very strong competition.

Sellers in this position are very concerned, but all is not lost. A business that is losing money may be rehabilitated with new ownership, and often they are, especially when the new owner has access to substantial capital.

There are some basic issues that a distressed owner should review:

  • Owners in this situation are very susceptible to emotional, impulsive action in an attempt to alleviate the symptoms of despair. Always have at least one trusted advisor with whom you can discuss potential action before you act.
  • Know your numbers and project the personal and professional financial impact of all actions, including short-term and long-term repercussions. Short-term suffering is usually easier to endure than long-term destruction.
  • Seek outside consultation in considering your options. Distress and anxiety cloud judgment, especially when an owner takes the “I got myself in this situation alone and I need to do the same to get myself out” approach. If you track that statement logically a consultant should be able to increase the likelihood of your success in a turnaround situation.
  • Consider changing your operational position. Many entrepreneurs stay too long in a CEO role when they are better suited to new development and marketing. This is one of the most common situations for turnaround managers.

A final point. Every business has value, even when it is losing money. If you start with this proposition, it increases the opportunity for you to find a profitable resolution. Damning yourself for your current distress does not.