[Cover Story] But Is the Timing right?

Editor’s note: The following article is based on Lance Tullius’ presentation at the PCT Mergers & Acquisitions Seminar in December 2006 in Orlando, Fla.

PCOs selling their business often focus on questions like why, what and how much. But one of the most important factors when selling (or buying) a business is just when you decide to do it.

Lance Tullius, managing partner of Tullius Partners, has spent 15 years helping business owners figure out the best time to take their companies to the market.

“The right time isn’t everything, but it’s huge,” he said. The trick, he said, is finding — and often waiting for — the ideal market conditions, which can be the most difficult part of the entire process.

PLAN AND RE-PLAN. At the outset, Tullius said, owners should put together a strategic plan that maps out their goals for the business and what they want to do when they sell it. He recommends taking an “out-of-the-trenches” approach, and not thinking about the day-to-day minutia of minding the store. Focus instead on if you want the business (or your family name) to be preserved for subsequent generations.

Once you have a plan in place, he said, don’t let it gather dust on the shelf. Every so often, take it out and re-evaluate it. Charting your course is good, he said, but be flexible enough to change it if the industry or other factors force you to.

WHEN YOU KNOW. Once you know for sure that you want to (one day) sell your company, start preparing for it. Get your business in order: Gather data on your profits, your accounts and customers, and the systems you have in place to run the company. Then, find a team of trusted advisers who can help guide you through the process. This team should include a broker, an attorney with mergers and acquisition law experience and a tax accountant, Tullius said.

“Like any other significant endeavor, the more time and focus you put into planning, the more you can control your own destiny,” he said.

HITTING A MOVING TARGET. And that team of advisers can help you avoid one of the worst pitfalls of selling a business, one that, if dealt with early, can allow for good timing and a successful sell: emotions. Even if the company is not family owned, Tullius said, many sellers he works with are doing a deal for the first time, are unfamiliar with the process, and aren’t always sure about what they should do — or when.

“A business is a moving target,” he said. Selling one is a complex and significant process, and one that usually involves someone’s largest asset. It’s not something that most owners do very often. Completing a sale and closing a deal, he said, “is largely psychology.”

Another part of selling that can be difficult for owners to deal with is Tullius’ advice that they should sell before their business is at its peak, not during or after. Having a stack of records that shows your company’s last three years each saw gains in the right columns means a lot more to a potential buyer than records showing flat-lined revenues or worse, losses, and your word that you know the business is a winner.

“You’ll never know when the peak hits,” he said. “And when you do, it’ll be gone.”

TODAY AND TOMORROW. Having a plan in place will prepare you for the day — however far down the road it may be — when you want to sell your business. And, having such a large part of the process already finished gives you the chance to watch the market and cherry pick the best time to sell, Tullius said.

Because, he said, at the end of the day, the value of any company comes down to one basic law of economics: supply and demand.

“There’s a ton of liquidity, a ton of capital in the market that is looking to be deployed,” he said. “There’s more money than good companies that are willing to talk.”

That surplus of funds combined with a glut of companies looking to buy means that a seller in today’s market could get more for the same business than she could in the next few years.

“Right now, today, we’re in a seller’s market,” he said. “You have a pretty exciting time for the pest control industry.”

The author is assistant editor of PCT magazine.

Taking Your Time

When it’s time to sell:

• When you don’t have to
• When there are many buyers in the market
• When your business is near its peak, not past it
• When others aren’t selling

When it’s time to buy:

• When it makes strategic sense; don’t expand just to expand
• When your business is doing well, and others aren’t