Getting out – When to sell your business

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Neal and Teresa Taylor were not planning to sell their printing business; however, that all changed when two Californians were sidetracked as they traveled the back roads north on Highway 83.

Kathy and Bill Brown had decided to check out the Tri-Lakes area. They were in Colorado to inquire about a couple of print shops for sale in Fort Collins and Greeley. They ended up at the Lake at Woodmoor in Monument and eventually in the parking lot of the nearby Woodmoor Center, where they discovered the Taylors print shop – Tri-Lakes Printing.

It was a Saturday afternoon when the Browns stumbled upon Tri-Lakes Printing. After peering through the windows, the Browns liked what they saw and called their business broker, who called the Taylors the following Monday. Neal Taylor said that he and his wife were probably not interested in selling, but the Browns would be welcome to visit anyway. The four met, and the Browns were interested but the Taylors held to their decision not to sell.

Three months later, the Taylors changed their minds. “We started thinking about all of the changes occurring in the Tri-Lakes, and we knew we’d have to expand, especially if a bigger fish came along,” Neal Taylor said. “It’s not often a good, qualified buyer comes along, so we called the Browns hoping they would still be interested.” Taylor made that call in November, and on May 1 the deal closed.

Taylor said the transaction would have taken less time but the Browns’ California house took longer than expected to sell. After nine years in the business, Neal and Teresa Taylor said they have no regrets and that both parties are satisfied with the deal. “As far as the process, I think the attorney and the accountant were the key players,” Neal Taylor said.

When a business owner is ready to sell, assembling an “advisory dream team” is vital to smooth sailing between sellers and buyers, said Ned Minor, a transaction attorney and partner at Minor & Brown PC, a Denver law firm specializing in exit strategies for privately held companies. Minor is the author of “Deciding to Sell Your Business,” and he has achieved his business savvy through 30 years of counseling business owners and participating in the business community. He also is the chairman-elect of the Denver Metro Chamber of Commerce Board of Directors.

Minor said a “dream team” is important to guarantee the best deal between parties. Engaging advisors drives the purchase price, he said. “Most business owners undervalue their business, and it’s always better to have more than one bidder on the table,” Minor said. “And business owners are experts at their business, but they are not experts at selling their business. You can get embroiled in the sales process when most deals take six to 10 months.” Minor recommends the team consist of a transaction attorney, a business broker or investment banker, a financial advisor, an existing banker and a certified public accountant.

Teresa and Neal Taylor were not emotionally prepared to sell their business when the Browns initially offered to buy, but financially they were good to go, and Minor said every business owner should run a business as if it could be sold on any given day. “Everyone should design and implement an exit strategy from the beginning,” he said.

The Taylors were in business for nine years before they sold, and, although Minor said his observations indicate that the typical length of ownership is between 15 and 20 years, it all depends on the owner’s financial goals. “After five years, if we can demonstrate that by selling your business today, you can get the most value and meet your life-style needs, convince me why you shouldn’t,” he said. “The best way to decide to sell is to define your idea of wealth and independence – how much income do you desire when you retire.” Minor said most business owners do not have a liquid network before selling; instead, they are relying on the sale to ensure their future.

The state of the economy obviously weighs in regarding the sale of businesses. Minor said that between 1994 and 2000 the record for the number of Colorado businesses sold was broken every year. “Buyers were throwing money at my clients with privately held companies, and business owners recognized the window of opportunity,” he said. “Then came the bust, and the technology bubble burst, and the banks locked their doors. Everything came to a grinding halt for the next three years.

“The economy is picking up for the first time in years and the buyers are back with a vengeance. Mergers and acquisitions are up dramatically, and sellers are receptive.”

The Denver Business Journal reported in April that first-quarter Colorado merger and acquisition deals totaled 75 – an 8.7 percent increase over last year. According to the DBJ, “The size of the median deal, for those with reported dollar amounts, rose 17.7 percent versus a year ago to $36.36 million (figures from Green Manning & Bunch Investment Banking).” In its quarterly review, Green Manning & Bunch reported a February surge in mergers and acquisitions in the United States – activity totaled $143.3 billion, which was seven times better than transactions in February 2003.

Minor said the best is yet to come as the baby-boomer business owners start to retire. “We have 9.6 million well-established middle-market businesses in this country, and 4.5 million have at least one owner who is 50 years or older,” he said. “Over the next 10 to 15 years, we will be unlocking trillions of dollars, witnessing the greatest transfer of wealth as the baby boomers sell their businesses.”

Minor’s book could not be timelier, especially in Colorado – an entrepreneur’s Mecca. He said 97 percent of all businesses in metro Denver are privately owned and have fewer than 100 employees. He believes that figure is reflective of the entire state.

To decide to sell usually takes a year or two, Minor said. His book outlines personal and emotional issues, such as when to sell and to whom. Once that decision is made, Minor discusses structuring the value of the business and the details of selling, such as stock sales versus asset sales. His book includes the ins and outs of the sales process, the critical legal issues, the after-sale process and terms that one might not otherwise recognize, such as basket, which is defined as a “deductible dollar amount contained in the definitive purchase agreement that is intended to prevent a buyer from ‘nickel and diming’ the seller every time the buyer believes he has a monetary claim against the seller.”

Minor also cites business owners he represented who have successfully sold. Bob Quinette is an example of someone never too young to sell. In 1991, at age 27, Quinette and his partner formed Denver-based Staff Administrators Inc., a new concept back then known as an employee leasing company providing payroll services, worker’s compensation insurance and other employee benefit packages. Within five years, the partners were managing more than 3,000 employees for their customers and generating more than $100 million annually in revenue. In 1996, Inc. Magazine listed the company as the 124th fastest growing in the United States, and, that same year, Staff Administrators Inc. was named Colorado Business of the Year.

Quinette sold the business at age 32, and Minor quotes him in the book as saying: “The money didn’t seem to be real. The magnitude of the purchase price simply did not register.”

Not every business owner will realize that kind of financial gain when selling a business, but Minor emphasizes the key to the future is to continually reinvest in one’s business with a long-term goal to “create value to hit financial objectives.” In the end, Minor said, “Every business owner either leaves feet first on a stretcher or sipping champagne at the Penrose

For more information about Minor’s book, “Deciding to Sell Your Business,” visit


Pullout: Most business owners undervalue their business, and it’s always better to have more than one bidder on the table. And business owners are experts at their business, but they are not experts at selling their business. You can get embroiled in the sales process when most deals take six to 10 months.

Ned Minor, Denver attorney and author of “Deciding to Sell Your Business”