If you’re creating or running a business, big or small, you should have that mindset that you’re going to be able to sell it when the opportune time comes. What? Yep! You’re creating value in your business so you have to be prepared.
We’ll have our guest today expound on that, particularly on the major sales challenges business owners face when it comes to selling their own business.
Jonathan Pellegrin has been in the publishing business for 30 years, having published trade magazines and business publications in 30 different industries.
Here are the highlights of my conversation with Jonathan:
Major challenge businesses face: Lack of energy to do business
- This is the time to monetize the value of whatever assets you’ve built to provide for happy, productive retirement.
- Businesses typically represent 90% of the owner’s net worth. Any business that can operate without the founder has value.
- The business owner should always be thinking that whenever necessary to sell your business, you’re able to do that.
Selling a Business is an Art
- Buyers are doing multiple transactions and make acquisition.
- Sellers have one big sale to make so it requires a lot of attention and planning. It’s imperative they do everything possible to be able to go toe to toe with sophisticated buyers.
Intellectual Capital
The real value of any business is intellectual capital, but people often overlook this.
What comprises the intellectual capital?
These are the processes, the routines, and all of the methods the business owner has developed over the years to make their business successful and to make their business replicable.
100% Close Rate
- We have 100% closing rate in our selling activities.
- Closing is about getting a yes or a no. The absence of a yes is a no.
- But salespeople are afraid to try to find out what the impediments are to getting a yes. If you don’t get there, there’s something standing in the way.
- Not getting a yes or a no is worthless. When you get a no, you get to ask for a why. So find out what’s standing in the way?
- Getting a no is the same as closing a sale because with a no, you have something to work with. Without any answer, you have nothing to work with.
The Framework of Selling a Business:
1. Exploration
This means gathering information. It’s important to talk to people who sold their businesses. Reach out to them and treat them as a mentor and they will share everything.
2. Decision making
If you’re a sole owner, you can decide yourself. But if there are shareholders, you have to create an alignment. It can be complicated if it’s a family business to get people on the right page.
3. Execution
Buyers have far more experience than sellers so sellers have to educate themselves. 4.Create your selling team composed of:
- Right hand/Middleman: Have a right hand person to stay with the business after it’s sold and they should be part of the selling team because that’s part of what the buyer is buying.
- Confidant: This could be you’re lawyer, only if they’re experienced and skilled in doing transactions.
- Accountant: They should have experience selling companies. This is critically important. You also want to have audited financial statements even if you’re a small business so you have credible numbers.
- Seller: This should be somebody who has sold a company before.
5. Position your company and develop a selling strategy.
Keep in mind that once you sell the company, you don’t own it anymore so they can do anything they want. Buyers are often not honest with what their plan is for the company. So shift the proposition so the added value is to the benefit of the sellers.
Jonathan’s Major Takeaway:
Be prepared. You’re creating something of value so you need to educate yourself. Talk to people who sold successfully and unsuccessfully. You should have a middleman about you still have to be actively engaged in the process.
Episode Resources:
Connect with Jonathan on www.sellingfamilybusiness.com or www.jonathanpellegrin.com.
Get his book The Art of Selling the Family Business.
Check out the TSE Hustler’s League.
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About Our Guest:
Formerly Chairman and Chief Executive Officer of Johnson Hill Press, JONATHAN PELLEGRIN, author of The Art of Selling the Family Business, launched his first magazine while a student at the University of Wisconsin. After graduation in 1967 and completion of the executive training program at a major New York retailer, he returned to Wisconsin in 1968 and joined Johnson Hill Press, a single-magazine publishing company founded by his father. He became CEO in 1976, a position he held until 1994, at which time PTN Publishing Company of New York acquired his family’s firm.
Pellegrin led three catalog trade missions in markets served by the company’s publications for the US Department of Commerce in developing countries on the African continent. This earned him an invitation from the Secretary of Commerce, Rogers Morton, to come to Washington and discuss his successful business endeavors.
Pellegrin attended the Owner/President Management program at Harvard Business School and received the distinguished alumni award from the School of Business at the University of Wisconsin Madison. This was followed by an invitation to become an executive-in-residence at the International Institute for Management Development in Lausanne, Switzerland. Working with IMD, Pellegrin created the IMD Distinguished Family Business Award as well as lecturing MBA students about entrepreneurship and writing a case study on the value of high functioning independent boards of directors in family companies. In addition, he earned a Doctorate of Business Administration at Business School Lausanne where he researched and wrote his doctoral dissertation on the sale of family companies.
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