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Dear Oaklyn Consulting,
I operate a seasonal business that relies heavily on tourism and favorable weather conditions. When the weather cooperates, our company is exceptionally profitable. However, the weather hasn’t been on our side for the past two years, affecting our financial performance. In light of this situation, I’m considering getting out.
If I wanted to position the business for sale, what should I be thinking about to help me make the decision?
From Oaklyn Consulting
One thing we came to appreciate early in working with small to medium-sized businesses is that not everything organized as a business is a scalable enterprise. Some businesses – even reasonably big ones – are better seen as self-employed jobs than as assets in themselves. Some are very good jobs, but they still can’t be transferred effectively from one owner to another.
The first question to ask yourself when deciding to position a company for sale, therefore, is what exactly will the buyer buy?
To help you think about the question, five assets that a buyer might be interested in are:
1. A going concern with a faithful following among customers and a profitable collection of activities that will continue in a stable way regardless of who is operating the enterprise
2. Customer contracts and the activities needing to continue to fulfill them
3. Intellectual property – trademarks, patents, brand names, trade secrets, recipes, software code, etc. – that is distinct and scarce
4. Supplier arrangements that are durable and hard to recreate
5. A track record of teamwork in creating products or delivering services
In the case of your seasonal business, ask yourself 3 questions:
1. Which specific assets will a buyer want, and why?
2. Who are specific buyers that can operate your business profitably, and why?
3. What do you need to show each buyer so they understand their return on investment?
You might discover that you have exactly what another business needs to succeed where you have not. Or you might discover that the secret to success is your own hard work, and the path to the next thing is who you team up with rather than who you sell to.
