Running the Comrades may seem like a daunting task but it is possible for most anyone who has a reasonable running base, is willing to do the training and has the tenacity to keep going on the day when things get tough. However, you don’t decide in January that you intend to start running and in the same year run a good Comrades. You need a sold running base of at least 2-3 years, and you need to be in relatively good running shape.
The same applies to selling a business. The business needs to have traded successfully for a few years and both the owner and the business needs to be ready for sale. The biggest single reason that businesses don’t sell is due to misalignment between the owner’s expectations and the state of the business. This doesn’t mean the business isn’t a good business, it just means you may need to do some more work on the business before selling or change your expectations from Silver to Bronze.
Just like one needs to take stock of your running preparedness before deciding to run the Comrades, it is vital to assess your businesses fair market value, its readiness for sale, your expectations in terms of what you think you will get out and what you need to get out after tax and see if there is alignment before putting the business up for sale. This process is referred to as Exit planning stage and is often skipped to the Seller’s detriment. Engaging in this Exit planning stage may add extra time and cost, but it will add a significant premium on the eventual sale of your business.
Once you have built the running base and are ready to commit to running the Comrades, the next step is committing to a rigorous training program. This training program for Comrades is usually a minimum of 1 000 kilometres of running over 5 months if you want to run an okay Comrades. This may seem like a lot but, when broken down, is only an average of 5-6 hours per week of training.
So to when it comes to selling your business. As soon as the business is ready you need to package it for sale, identify potential buyers, contact them, sign NDA’s, present the opportunity to them and get two or three ponies in the race. This is not rocket science, it is a process, and like training for the Comrades it is time-consuming and requires a lot of grunt work. Preparing the marketing documents for a sale will typically take 1-2 months and getting potential buyers motivated to start negotiation will take a further 2-3 months. Just like training for the Comrades this requires breaking the task into several steps and pushing each step forward daily. It will usually be more work than a busy entrepreneur can handle and is one of the areas where the transaction advisors can help. Although a transaction advisor adds significant value at several points in the process due to their experience with selling businesses, 90% of what the transaction advisor does is run a simple marketing orientated process comprising a lot of grunt work which is pushed forward daily.
Finally, the days of the Comrades arrives. It is a joyous moment, no more training to do. The hype at the start is amazing, the national anthem and chariots of fire are played, the cock crows and the run starts. The first 60 kilometres are fun, you have trained for these distances and the crowds are great and the comradery of the runners carries you. Then you cross into unchartered territory, you have now run further than any of your training runs and if you are a weekend warrior like me it is a long day and you are impatient to finish. The pain sets in, you struggle to take in nutrients and start running out of energy and, worst of all, you start doubting you will reach the end. This is where the Comrades starts. If you training was good and you have tenacity you will finish, but the end part is where you need the support of the crowds and where you need to dig deep.
The day of running the Comrades is the perfect analogy for the actual sale process. You are excited, the business is ready for sale, the marketing documents are ready and potential buyers have started to engage. Courting the potential buyers and getting into negotiations is great fun but as the sale process goes on, and the buyer finds things they are unhappy with or can use to drive the price down you start running out of energy and start doubting the value of your business. This is where the sale process truly starts. If your expectations are reasonable, you have a good valuation that you believe in, your underlying preparation was good and you have tenacity then you will sell, but the end part is where you need to the support of your transaction advisor and where you need to dig deep. Agilequity specialises in helping business owners sell their companies and where we differentiate ourselves is that we like to add the Exit planning step to make sure we don’t waste your time and money by putting your business up for sale before it is ready. If you would like to know more about our Exit planning or Sell side M&A advisory services, please visit our website www.agilequity.co.za and we would be happy to have a free consultation about how we can help you.