Much of our industry is family-owned, and many companies have passed from one generation to the next. Some owners now find there’s no successor waiting. If that’s you, the question becomes whether you’re ready to sell, and whether the company is.
Those are different questions. You may be ready today. The business may need a year or two of work before it will bring the price it deserves.
What buyers pay for
You want to go to market when value is strong, ideally near a peak. In linen, uniform, and laundry services, a few themes drive higher values again and again.
A strong local market position. Leaders in their markets command the best prices. Do customers and prospects know your name? Can they say how your service differs? Do you focus on one or two segments (industrial, food and beverage, healthcare, hospitality) where you can credibly lead? Companies that serve a little of everything can be perfectly profitable and still struggle to show buyers what makes them different.
Consistent performance. Buyers assume the results you’ve posted will continue after closing. Several years of steady, profitable growth is one of the most powerful value drivers there is. If your results have bounced around, be ready to explain why. And know how your margins compare with the industry.
Customers under contract. Buyers struggle to value revenue that isn’t tied to a contract. It’s that simple. Renewing expired agreements is one of the cheapest ways to add value before a sale.
A stable team. This business runs on good managers and a steady frontline workforce. Low turnover and long-tenured leaders tell a buyer the operation won’t fall apart after you leave.
A word about the plant
Your plant may be a source of real pride. Be careful about assuming it adds much to the price. Some buyers have capacity nearby and don’t want it at all. Whether it matters depends on who your likely buyers are, where they operate, and whether they need more capacity. Serious environmental issues will usually end a buyer’s interest in the facility.
Build a plan before you go to market
A few companies could go to market tomorrow and get top value. Most we meet have a handful of weak spots worth fixing first. The plan has four steps.
- Establish your range of value. Know what the company is worth today and why, and what it could be worth if the key factors were working in your favor.
- Identify your most likely buyers. Do they compete in your segments? How does your share compare with theirs in your markets? What will they see as strengths, and what will they discount?
- Decide what’s worth improving. Some factors are easy to change, like renewing a contract. Others, like your customer mix or service area, may not be practical to move. Weigh the effort and cost of each against what it could add. If the return isn’t there, skip it.
- Carry out the plan.
Step one starts with a valuation from someone who knows the industry. It should give you a realistic minimum and maximum, a review of what’s helping and hurting value, a view of your best-fit buyers, and evidence that the firm’s past estimates held up against real offers.
So, are you ready?
If you’re nearing the point where you want to step back and don’t have a successor, start now. Selling well takes planning, and the planning takes time.
You may find there are clear opportunities to raise value first. Or you may find the company is already worth about as much as it’s going to be. If that’s the case, the answer to “Am I ready to sell?” is probably yes.
