Advice on Selling Your Business in Minnesota

Minnesota attorney Aaron Hall speaks with Darron Dickinson, Venture Strategist & Chief Growth Engineer at Dickinson, Palmer & Company. Darron explains some of the common questions and concerns business owners have when preparing to sell their business.

Aaron Hall: I’m Aaron Hall, an attorney in Minneapolis. I’m here with Darron Dickinson who works with business owners who are preparing to sell their businesses. Darron, as a potential client comes and talks with you, what are common misconceptions or questions that they have?

Darron Dickinson: I think the most common one here is how do I prepare my business for sale, what are the steps that I need to take, and when should I start thinking about it. Oftentimes, we almost start too late. It’s either some kind of life event. I’ve had illness in the family, an illness in yourself that starts you to think about the transition planning, but that needs really start ahead of time. I think that how do I prepare it is going to be crucial. As I was telling you earlier, there’s an article that I just read that we spend 80 hours getting our business plan ready to launch a business, and we spend 6 hours actually preparing for an accident after we’ve put hundreds of hours and years into the business to grow it. We only spent 6 hours figuring how to get out of that time and really maximizing that value.

Aaron Hall: So when somebody says, “What should I start doing now to prepare to sell the business”, what do you tell them?

Darron Dickinson: I think, first of all, number one is make sure that you have all your financials right. We’ve talked a lot about that. It’s time to stop doing QuickBooks yourself. Get somebody that when the financials are done, I start reviewing them that the real that there’s something I can use as a base line that I can prepare for. Secondly, I start looking into my management team. What’s the strength of the team that I have? What are my processes, my technologies that support that? What are my industry trends? Understanding all of these things goes into building a good marketing proposal or marketing plan to put out there for the business and also going into the evaluation of it.

Aaron Hall: So that’s essentially responding to a potential buyer’s primary concern. First off, are these financials reliable? Am I really getting what they’re saying I’m getting, which goes into trust as well. I imagine that’s really important early on in a negotiation. And second, of course, management. Who’s running the business? When you talk about leadership of management, are there specific attributes you look at? Or tests? How do you analyze leadership which is kind of an amorphous, ambiguous term?

Darron Dickinson: It is. One of the things we look at is and it will go into…each leadership position has a different function or role whether it’s chief operation officer. As part of our review, we’re going to look at how is that business performing. Do they have controls around? Let’s say the operation. Are they staffed right? A lot of these questions go into the quality of the leadership that’s there. So it doesn’t have to be so much I’m looking at the personality traits, but I’m looking at how well that particular piece of the business is running and then the leadership above that, of course, will kind of work its way out. So we get a better understanding of how they’re doing. And one of things that I remember is at some point, you’re selling the business, but that leadership team is probably going to remain behind for that new owner. And in a highly competitive market which we are moving especially into the next 10 years, the stronger that you have in these particular categories. So like I mentioned, the business side we go through is pretty much every area of your business and rates it and finds your weaknesses or opportunities. And we do that because we want to try to get you the highest value. And in order to get the highest value, now you’re going to have to overcome all of these other businesses that are for sale. I mean, if 100 are coming up for sale and you got 2 or 3 that are actually going to be sold, you want to be one of the 2 or 3, and it starts by having that plan in place.

Aaron Hall: So for a baby boomer that owns a business and is seeing this trend of more and more baby boomers putting their business up for sale, can they get ahead of that by starting the sale process now? Perhaps finding a buyer and doing a transition over time?

Darron Dickinson: Absolutely. And the question is too, who do you want to transition to? Maybe it’s a management buyout. Maybe you want to find a younger partner or somebody that isn’t ready for retirement and transition to them over time, giving them almost a trial in the business. So there is other options, but if you’re really going for the sale, I think you need to look at what is your expectation going forward in terms of inflation and tax implications. What is your expectation of getting out of the business? The longer, I think, you wait and the more businesses or the more baby boomers that start retiring, the more there is going to be for sale, the higher the competition is going to be. So I think there’s a lot of different factors coming into play that need to be considered about what is going to be the ideal time to put it up for sale. But starting planning today before you are in the position to sell is a better idea than like I said, when you come under fire, and then you’re going to have to take what you get.

Aaron Hall: So chronologically, what are the steps in preparing for a sale?

Darron Dickinson: I think from my perspective, first thing I want to do is come in and look at the business. I mention the business audit. Let’s take a look at where we are. Understand kind of what your goals and objectives are. What do you want out of the business? Is your evaluation even reasonable? So maybe you think the business is worth 10 or 20 million dollars. When you start looking at the evaluations, it may be more or less but let’s figure out. And then the second thing is once we understand what your goals are for the business, how do we prep that? And the way we prep that is unique for each business. You may have very strong financials. You may have very strong marketing, but maybe operations needs a bit of shortening up. So what we do is tailor it to that piece of the business so then we’ll build you a plan. Here’s where you are today. Here’s where you want to get to. This is what it’s going to take.

Aaron Hall: Do you have any tips for people who aren’t sure whether they should hire professional help in selling their business?

Darron Dickinson: I think like every other business owner, it comes down to how much time do you have. Do you have enough time to get the business ready for sale? Do you know enough about all aspects of the business? Have you seen enough different business to know what it’s going to take? We’ve worked with a lot of private equity firms over the years and even trying to figure out who’s a buyer of particular types. Maybe one private equity firm likes technology in the 1-10 dollar range, but there’s another one that really focuses on medical devices in the 10-20. Knowing who they are and who the buyers may be is critical as well.

Aaron Hall: If potential sellers of business would like to get in touch with you, how should they contact you?

Darron Dickinson: Probably the best way is that they can call my office which is (763) 205-2100, or I’m available at Darron Dickinson Palmer. D-I-C-K-I-N-S-O-N. Palmer. and you can even visit our website as well.

Aaron Hall: Any final advice for business buyers or sellers?

Darron Dickinson: I think my final advice is looking at what we’re seeing from a strategic or competitive landscape is start early. It doesn’t have to be overwhelming. It doesn’t have to be overly time consuming, but the longer time frame you get it, the more reasonable it is to accomplish it. So start early.

Aaron Hall: That’s good.

[End transcript]