Time to Rebuild?

Monday, March 22 2021

Entrepreneurs must always be prepared to face the cycle of building and rebuilding. In 2008, while I was researching a book, my wife and I travelled around North America in a small RV. In many small Southern towns, it was pretty clear that businesses were in trouble. Building and construction had ground to a halt. The financial crisis was having an impact. I saw it again in 2012 during a research trip with my son to Northern Ontario. Many main street stores were boarded over or for sale.

In December 2020, dozens of businesses in the Toronto community of Roncesvalles staged an advertising campaign. They covered street-facing windows with brown paper and ‘For Lease’ signs to let their community know what the formerly vibrant small business section of town would look like if customers shopped at big box stores and Amazon rather than locally.

So, entrepreneurship has always been challenging. There’s a high failure rate. Twenty years ago, if you chose a business that today is in the sweet spot – making PPE, hand sanitizer, takeout food, outdoor heaters or eye make-up, you’re probably ok. If you chose a traditional business that is easier and less expensively served on the internet, then you may be in trouble – unless you were able to pivot and get online.

Over a decade ago, Roger Rogerson reported that American companies had only a 1 in 5.5 chance of selling if they had ten or less employees. Recent sources suggest it is now closer to 1 in 10. Ouch!

If you’ve built a company and now you’re getting closer to retirement, perhaps even expecting the sale of your business to fund your future, think… only ten percent.

Then ask a few questions:

  • Has my business been profitable for the past three years?
  • Is my market growing or shrinking?
  • If I give the business to my kids, would it be an asset or a liability?
  • Is it cleaned up and ready to sell if a qualified buyer shows up?

Are you ready to sell under the right circumstances? Or do you need to hunker down over the next few years and focus on rebuilding:

  • Making predictable profit
  • Paying you a decent salary
  • Running smoothly even if you aren’t there

There’s no use sugar-coating it. Without these last three points, you probably don’t have a business that someone wants to buy.

But if you aren’t in a rush to retire, get to work with your team of advisors to rebuild. Make a commitment and set a goal to be one of the 10 percent who finds a buyer.