Even if you have never considered the possibility of selling or merging your business, it remains an option you should explore. How, if and when to consider a sale or merger are questions which every business owner should confront.

A sale or merger of your business can be the most beneficial business transaction of your life. Your sale should be designed to maximize your wealth and liquidity, minimize your taxes and risk, and/or generate ample expansion capital.

The most advantageous time to consider a sale or merger is when your business is doing great and the future looks promising. This is the time when your business looks most attractive to potential acquirers and when you can realize the most beneficial results for your company and yourself.

LSH publishes an informative monograph entitled. "A Variety of Factors Dictate when to Sell Your Business," which addresses these ideas and more. Developed jointly by LSH and owners of closely held businesses for which LSH has arranged a sale or merger, the monograph will help you to determine if and when a sale or merger makes sense and will show you how to go about getting the best deal. Excerpts are available on pages three and four of this monograph. In addition, it also addresses these important subjects:

• how to create a competitive market for your company, thus enabling you to achieve the highest selling price possible,
• how a stronger economy is helping to make the current market a highly favorable one for selling or merging a closely held company like yours,
• how to make your business look most attractive to potential acquirers, and
• how to effectively sell your company by "reaching out" and directly contacting buyers
  rather than sitting back and waiting. That's the way to get the best deal.

The best reason to sell, is to cash in. After all, as an owner of a successful business, you have strived for a long time. You have paid a lot in wages, made profits for your suppliers, and given customers a better product for a lower price. It's time for you to be rewarded.

We sincerely hope that you will benefit from the excerpts of "A Variety of Factors Dictate When to Sell Your Business." You may have a printed copy free of charge, simply by notifying LSH. We look forward to sending you a copy.

For everything there is a season. Sooner or later every business is either sold or liquidated. Knowing when to "harvest" a business is difficult. Many elements enter into the decision making process and the decision is complicated by the emotional overtones of selling one's business.

People joke that a business is an entrepreneur's "baby." To the entrepreneur, this is no joking matter. The thought of selling his business is very difficult. He conceived it, guided it through gestation, nursed it through infancy, taught it to walk, and kept it from falling out of bed. He did all this at great personal sacrifice. A parent knows a similar anguish when they have to finally "let go" of their maturing child.

The pain evoked in selling one's business goes still deeper. Subconsciously, selling is often felt to be an admission of mortality or inadequacy. It is like considering life insurance. Most of us put off thinking about life insurance because we recognize that someday we will die.

Inadequacy is especially hard to deal with because the business is an extension of the individual. Even parents cannot provide everything their child needs. They must enlist the help of schools, churches, and other institutions to give their child a well rounded upbringing. In the same way, many entrepreneurs need to realize that they may have taken their "baby" as far as they can and that another person with greater financial resources, management skills, etc. may need to step in for the sake of the business, the employees and even the entrepreneur.

The question remains, "How do I know when its time to sell my business?" One must consider this question with the same detachment and objectivity that a successful stock analyst employs as he or she considers their investment decisions. A businessperson should look at his or her business as a part of their personal portfolio which must be maximized.

The following are general signals which indicate the reason for selling is approaching or has arrived. The first six are business related and the second six are personal in nature:

Business

Maturity of the Business Vis-a-Vis the Industry. You can achieve a higher price for a business when it is growing at a faster rate than the industry average.

Heavy Financial Requirements. Continued growth requires maintaining debt levels which are higher than the owner's capacity or comfort level.

Cash Buildup. A business is throwing off more cash than it can wisely use. Applying a multiple to this cash flow may maximize your net worth now.

Competition. If a businessperson suspects that his or her competitors will adversely affect sales and profits, the sale of the business may produce more personal financial gain than continued ownership of the business.

Economic Conditions. Economic change has been the password in most industries over the past five years. Future prospects are bothersome. The sale of a business nails down one's wealth now.

Continued Business Growth Demands Different Skills. It is not unusual for a business to grow beyond the point which an owner can control. As a result he or she has to add additional management. This can be a headache and take the fun out of the business. Some businesspersons never adjust to the loss of control.

Personal Indicators

Age - 50 and Up. One out of five men age 50 will not reach 65. Women who are business owners in the 1990's are now subjected to the same stresses that their male counterparts have suffered - and are experiencing the same stress related maladies in relation to longevity. A business sold by an estate usually nets less money than a business sold by an owner.

Health. Many businesses will fall in value as an owner's health or stamina declines.

Loss of Interest. The business has become a bore. It has lost its challenge. A businessman may want to go into new ventures, reduce his workload or retire early.

Family Situation. Often the state of the spouce's health, marriage instability or lack of a family successor will prompt the sale of a business.

Employee Situation. Can your employees afford to purchase the business? Can they successfully manage the business in your absence? If they cannot do both, they would be better off under new ownership, where your wealth has been taken out and they have a solid future with new owners who are adequately financed.

Entrepreneurial Hunch. Most entrepreneurs have an intuitive sixth sense. They trusted their intuition when they started their business and have followed it through the years. If it is saying, "Now is the time to sell," be careful not to ignore it. Instead, consider the matter with great care.

What happens If we fail to read the signs? We have all seen what happens when transition has been imposed on a business by the untimely death of a principal. In such an event, the business can quickly lose its impetus and may decline rapidly. On the other hand, the business may be overwhelmed, by competition, economic hard times or disintegrating organization. In either case an owner or his estate will receive far less for the asset he has worked so hard to build up.

After dealing with hundreds of business owners going through this agonizing decision making process, we have concluded that most owners go through three distinct stages. In the first stage the very thought of selling is almost traitorous and never considered seriously.

The second stage begins the moment the thought of selling crosses one's mind as a real possibility. Usually this is caused by some business or personal problem. Instinctively one rushes to jam the thought back into Pandora's box, but it is too late. This second stage is characterized by tremendous emotional instability: one day the sale is on, and the next, it is off. At some point, after a period of vacillation the person takes control of his or her emotions and decides to maximize the asset he has developed.

The third stage is the most rational. In order to make a wise decision, an owner must view his business dispassionately and ask, "What is best for me? My Family? My Employees? My Business?" In short, the best time to sell is when an owner can plan for an orderly transition and is not forced to sell on unattractive terms. The worst time to sell is when illness, retirement, death, or financial mishap force the sale of a business.

Once a decision has been reached, regardless of the outcome, it should be implemented with the same vigor used in starting and building the business. In the final analysis, a crop is either harvested or it is not. Special skills are required to sell your business. You can put our "Harvest Hands" to work for you by calling Lee, Sperling, Hisamune.

Lee, Sperling, Hisamune
550 North Brand Boulevard, Suite 525
Glendale, California 91203
Phone: (818) 507-6645 - Fax: (818) 507-7891
Email: lsh@leesperling.com