There are a variety of conditions that may indicate that it is a good time to contact a business broker to explore exit strategies. This blog post is part of a series about signs or indicators that it may be time to consider a business sale or exit.
Sign it is time to sell your business #7: lack of management skill necessary to take business to the next level
It is not uncommon for a business to grow to a point where the owner and/or the current management team don’t possess the appropriate skills, knowledge, or experience necessary to take the business to the next level. For example, a rapidly growing company with potential strong mass market appeal may have succeeded in expanding from a local business to a regional business, but key management may not have the experience or skill necessary to grow the business exponentially to a national brand. Or, perhaps your business manufactures and distributes products domestically, but there is the perception that creating a strong distribution network throughout Central and South America would be the most logical method of growth, but you aren’t sure how to go about this, you aren’t familiar with the cultural nuances that may need to be addressed, and are not sure what legal and accounting issues may be involved with expanding internationally.
If you reach a point where you aren’t confident of your ability to successfully manage growth of the company to the next level, you could hire someone to assist with that expansion. However, there is a risk that because of your lack of experience, that you may not be as adept at even knowing what attributes you should be looking for in new management talent (the old adage, “it’s important to know what you don’t know”). The danger, of course, is that you plow forward beyond your current competence level, and the business struggles and becomes worth far less (or worse – isn’t worth anything) than if you had sold it while it was doing well and the growth opportunity was still unexploited.
If you have a business that has $7 million+ in annual revenue you may not need to sell and exit at the same time. There are private equity groups who would love to have an owner stay on in some management capacity, but the private equity group will also help identify and bring in additional management with the skill and expertise to successfully grow the company (and will bring in expansion capital, as well!). It is not uncommon in this type of deal structure for a seller to financially benefit from the growth in the business after the private equity group’s investment.
