You've heard the cliché "buy low, sell high" but we rarely take heed of such a cliché. Instead and for whatever reason, we ignore the signs that our business is in a decline. And before we know it, we've destroyed huge amounts of value by waiting too long to see the signs. That's about the time I get a call.
I have talked with well over 1,000 business owners and the story is ALWAYS the same... "My business was doing so great a few years ago." In the meantime, sales have significantly declined and costs have increased. For example, I recently had a business owner ask me to sell his business, a multimillion dollars business with annual net income in excess of $800,000 just a couple years ago. That business was worth in the $2 million range back then. Today the business' annual net income is about $200,000 and the business is worth $400,000 at beast. That's more than $1.6 million of crushed value!!!
Of course, no one intends for this to happen. It sneaks-up and before one realizes it, the business is dying. It isn't that one has failed or is a failure per se; rather it is simply a case of losing focus on your long term objective - usually to make good money so that one can have a comfortable lifestyle or to help charity organizations.
But there is a sickness that many business owners have, it is called "Positive Reinforcement Syndrome." Here is how it works: The business at one time was doing great. You establish a life style based on this level of business. Then business starts to turn south but you don't adjust your life style. The reinvestment in your business suffers and your business continues to go south as a result of your life style and not reinvesting. Then you have a good week or month and you think your business has turned the corner and all thoughts of selling are gone. Then the next few months aren't so good. Then the feelings of selling come back. Then another week or two of good results followed by the same downturn.
In extreme cases the business owner then starts to not pay sales taxes, payroll taxes, starts to lay people off and starts working long hours. At this point, it is over. The business is dead and the owner just doesn't know it.
Let's avoid this all too often senario I hear nearly every day. The way to create lasting wealth is to know when to sell and when to rejuvenate yourself for your next big venture with a nice fat bank account. You've work far too hard to destroy value.
Remember, fail forward not backward. Learn from your mistakes and don't keep making them.
Know when to sell!
Give me a call to discuss selling your business.
We at SellingRestaurants feel obligated to educate the public, our customers and our clients with information that can help them make more intelligent buying and selling decisions.
Mel Jones is one of the premier restaurant brokers in the nation having published hundreds of articles on buying and selling a restaurant and bar business, selling thousands of restaurants in CA., WA and AZ and building one of the most copied business models in the brokerage industry. Mel started SellingRestaurants in 2004 with the one simple concept, give the buyers the information they need to make intelligent buying decisions without being pestered by a broker or hiding information, prepare the business for market by researching key details that make or break deals and educate the buyer on the buying process to create an intelligent buyer. Prior to SellingRestaurants, Mel was a Chief Financial Officer for Universal Music Group, the largest music company in the world. There he participated in more than $11.5 billion of merger and acquisition transactions. He also work for top companies such as Nestle Foods, USA. He hold a Bachelors in Business Administration Finance as well as attended Law School at Gonzaga University. Give Mel a call at 480.274.7000.