Case Studies

Strategic outsourcing

Make or Buy
Having the luxury of making your own products is great but may be costly. Often there are hidden costs that are not considered or properly allocated. Conversely, buying manufacturing capacity from someone else can have costs that are not easily understood and are not only financial. When offshore production is considered.. Read more

 

To Sell or Not to Sell
Selling Your Business

Exit strategy

Business owners frequently struggle with selling their businesses. At the core of a successful entrepreneur is the ability to see opportunity in the future and a fundamental enjoyment of the journey rather than the destination. Selling a business ends the hunt and while it can be rewarding, it also puts an end to the daily routine that many entrepreneurs thrive in. Managing the transition is critical for setting up a successful legacy.

Eventually, all business owners must develop a transition plan for when they will no longer be involved in the business. Family members or key members of the management team may find a way to carry on the flag or the business may be sold to outsiders, but inevitably all owners must come to terms with what to do as their role diminishes.

In his late sixties, our client was pretty happy to work about 30 hours a week, play some golf with the guys on Thursday afternoons and spend a reasonable amount of time at his winter home in Arizona. As he rounded the corner into his seventies, those 30 hours became more and more precious and he found himself less willing to step into complex problems or growth initiatives that would require more of his time. He finally decided at age 72 to sell the business, but there was a snag.

His distribution business had a contract with the largest vendor that gave the vendor first right of refusal when he chose to sell. It also required him to play an active role in the business until it was sold which meant he could not be an absentee owner. His problem was that his business had a lot more value if he remained in the top seat, but he no longer wanted to occupy it.

The trick in all negotiations is to understand the leverage points and value from all angles. The vendor had a lock on the distribution and parts business of our client, but he had a sizeable service business which the vendor did not have locked up. As a result, we worked with him to build his service business and then look for competitive offers that were willing to buy the service business at a price that forced the first bidder to reconsider their offer. We also helped him educate the vendor on the strategic implications of keeping the business whole, service and all. As a result, he was able to obtain a fair market price for the business from the key vendor.

Each business has a unique set of variables that need to be dealt with in order to successfully transition a business beyond the current business owner. Understanding and articulating these variables is often difficult for business owners to develop on their own. Using Genoa to jointly develop the transition plan allowed our client to leave on his own terms and spend more time doing the things he wanted to do once the business was sold.