Should you stay, or should you go now?

I get at least one question a week from owners looking to sell their flooring business. I can certainly advise you, but I’m not the expert. So I decided to contact John Palladino, a corporate divestment and acquisition consultant, to get a professional look at selling a business.

Palladino tells me that selling a business, like anything else, requires a certain skill. “The biggest problem is the company’s valuation,” he explains. “Like anything else, the value of a company is determined by what someone is willing to pay for it and what they will accept for it. That doesn’t mean you should devalue your business, and there’s always room for negotiation; you just have to be realistic. There is a big difference in the price of a company that is up to date and one that has not changed much in 30 years.”

Here are the key factors Palladino said you should consider:

1. Ask yourself what the company is worth. Once you get to some, ask an advisor for his or her opinion on your company’s valuation and whether it is realistic in the market. If your valuation isn’t realistic, see if you can come to terms with what others may think your company is worth. Then move on to getting your business ready for sale.

2. Who to sell your business to. Your store can be a business enhancer for someone; for example, a major contractor or innovator may consider flooring a strategic purchase for supply chain reasons. Another possibility is that your company is in a new, geographically evolving market.

3. Pay attention to the details. Before you market your business, make sure it meets the standards of successful companies in your industry. Are the books and taxes up to date? Do you have a viable customer base? What about your website and your social media? If all you have to sell is inventory, it can be just as easy for an interested buyer to open across the street and do business.

In short, do your due diligence before selling your business. What is the company’s history? What is the growth rate? A potential buyer will also want to know if management is present.

4. Develop a solid personal financial plan after the sale. It is likely that your company is both your retirement fund and your most valuable asset. What do you do with the money once you receive it? Make sure to invest it wisely.

5. Can you stay on as an employee? If your business is complex, or if the new owner requires a significant amount of training, the resale value of your business can increase if you agree to stay on for a limited period of time. In addition, the buyer may want to value a portion of the company for future earnings and you may want to liaise with the company to ensure that such benchmarks are met.

6. Should I just ‘want’ the company to my kids? Not necessary. “This can pose several problems unless you consult an experienced advisor,” Palladino said. “If you’re expecting a payout in a few years and it’s part of your retirement funds, prepare them early so you can be sure they know how to be effective businessmen. If you expect a payout in a few years, a buy-sell agreement should be drawn up. If this is your retirement money, you want to make sure you receive it on time.”


Lisbeth Calandrino has been promoting retail strategies for 20 years. Contact her at lcalandrino@nycap.rr.com to have her speak at your company or to schedule a consultation.

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