Determining the Best Time for BSCs to Sell their Business

By Gary A. Penrod, CBSE

To sell, or not to sell; this is the question that many entrepreneur-founders will ask themselves throughout their career. It occurs when times are good; other times when things are not so good and the walls are pressing in.

Having sold the contract janitorial firm that I founded after 14 years of operation, and subsequently and currently assisting others to sell their businesses, I find that one has to give serious thought when considering divestiture of what is likely to be one’s largest asset and defining experience in a lifetime.

Is the time right for you to sell, personally, or are you reacting to short-term circumstances that with perseverance and strategic thought can probably be overcome? Operating a business can be daunting at times, requiring hard work and long hours. It can be akin to being on a treadmill that, if dismounted, will cause the business to collapse. In such a case, those circumstances need to be righted before considering the sale of one’s business. Therefore, the shareholder’s personal preference for divestiture should be in sync with other factors: good results for recent past growth and performance, current good performance and good projected growth and performance.

Have a plan for the future; it begins tomorrow. Developing the basic outline of a plan, filling in the details as time passes and circumstances change, is prudent. Circumstance and outlook may change over time, so revaluating goals from time to time is wise and may help as divestiture approaches and is within sight.

Observe and learn as others move on to divestiture. However, be circumspect, not necessarily accepting all that appears to be fact, but may not be. What may be true for one transaction, may not be true for another. Each transaction, while similar in some respects, is unique. Seek to learn from those with specific expertise while listening to your own wisdom and instincts. It’s not likely that one will have all of the knowledge and expertise needed to successfully sell one’s company. However, those that divest need to fully understand and agree with the divestiture process and projected result.

The time has arrived. The plan is made and the expertise of self and others has accumulated. It’s time to consider other factors. Which are the most likely and qualified buyers? Whether through a qualified intermediary group or oneself, this selective process is important.

There are certain characteristics of each company that can affect the divestiture outcome that are beyond the shareholder’s control — although sometimes those characteristics can be changed, which will take time. In the buildings services industry, certain market areas, market sectors and the production labor model (contract management model; self-perform) used can make a difference. Therefore, one has to understand and be realistic about how these and other characteristics can influence outcome.

Eventually, all businesses will change ownership or cease to exist. Whether through the acquisition process or through generational pass through, it is wise for shareholders to understand and be prepared for that eventuality.

Selling one’s company, while not a benign process, should be approached with an open mind and a willingness to accept the advice of others with specific expertise. None are all-knowing, including the shareholder seller. The company owner needs to be introspective and have a plan for being the new person that will emerge after the sale and transition period. It does not have to be an end; rather, the beginning of a new venture or adventure.

Gary A. Penrod is a long-time building services industry leader and author, having founded and operated a successful service company. After that company’s divestiture, he founded Gary Penrod and Associates, Inc (GPA), an industry-specific M&A group, having exclusive focus in the building services industry. GPA continues to serve the building services industry, having successfully assisted many firms with their divestiture process in USA, Canada and The Caribbean. Penrod is also a former board member of Building Service Contractors Association International, and a past president.