By Joe Ciccarello, CPA, MST, Gray, Gray & Gray, LLP
The only thing harder than knowing the right time to start a business is recognizing when to sell it. Choosing to sell the fuel oil or propane company that you have nurtured and guided for so long can be a difficult decision. There are practical considerations, such as market conditions and rising costs. But you must also factor in personal concerns that affect your decision. Here are six telling signs that it may be time to sell your company.
1. You have no successor. This may seem like an obvious clue. If you do not have a child, family member, or trusted employee to take over the company, the only choices you have are to sell or simply close the doors and walk away. Yet many business owners are reluctant to face up to the fact that they can’t go on forever. Better to step out now while you can make some money for the business than wait until you have to hold a fire sale.
2. Pricing for energy businesses may be peaking. Investment in energy companies is coming from a variety of sources. In the past you might have been able to sell your propane or fuel oil company to a competitor or larger regional dealer. In recent years venture capital companies have discovered the market, and their investments have driven up prices. This won’t last forever, so you may want to take advantage while you can. Additionally, the “green” movement continues to gain momentum and support at both the federal and state level. This will almost certainly have an impact on fossil fuels like propane and heating oil, which could devalue your business.
3. You no longer enjoy the work. Have you lost your enthusiasm for running your company? When you started the business, or perhaps when you joined the family company, you were eager and excited. But the daily grind can cause the work to become boring and routine. If you have been dissatisfied or frustrated for an extended period, it is time to consider selling.
4. You can’t sustain a profit. A new business may take a while to make a profit. But an established company must be able to turn out profitable years, one after another. Otherwise you cannot pay your bills, purchase inventory, or maintain a payroll – much less pay yourself a reasonable wage. In addition, banks are putting more emphasis on profits over personal relationships, so if you are showing consistent losses your lender may require you to put in more assets or risk losing your financing. Continually carrying a debt load to meet your obligations is unsustainable and potentially devastating for your own future. Time to get out while you can.
5. Changes in the industry. As markets evolve and industries mature, some owners find that things have passed them by. They are no longer able, or willing, to keep up with the changes. This can lead to excess stress and, eventually, burnout. If you feel you have taken your business as far as you can, it may be time to get out while you are ahead. You may be better served by letting a new owner take over before you put your health at risk.
6. You want to cash in. You have devoted years of time and effort to make your business successful. Now you can finally reward yourself by cashing in on the “sweat equity” you have invested. Monetizing all the work you have done and exiting the business will give you the time and money to do other things.
If you recognize any or all of these signals, it may be time to consider exiting the business. If you decide to move forward with a sale, make sure you work with someone who has experience in selling energy companies. They can help you take an objective inventory of assets and give you a realistic understanding of your company’s value. It is also important to have a financial plan for the funds generated by the sale, before the deal is done. Preparing in advance for your business exit will help ensure that the sale goes smoothly, and that you’ll reap the maximum financial benefit.
Joe Ciccarello, CPA, MST, is a partner in the Energy Practice Group at Gray, Gray & Gray certified public accountants and advisors. He can be reached at (781) 407-0300 or email@example.com.