“FEDERAL NEWS NETWORK” By Mike Kapetanovic
“Factors to consider include the state of the market, the economic climate and the overall health of your business. If you’re a few years away from retirement, clear on your firm’s financial future and confident in your team, it could be a good time to look for buyers.“
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“The decision to sell your government contracting firm is a big one. If you’re like most firm owners, you’ve put years of time, energy and love into building your business, perhaps starting completely from scratch. It’s not a decision to make lightly. Eventually though, something will change — you might want to retire, or face a change in personal circumstances or simply desire to move on to new ventures. I’ve been in this position myself and I regularly talk to business owners who, for a wide range of reasons, are contemplating an exit. One question pops up in these conversations more than any other: When is the best time to sell?
The answer isn’t always straightforward. It can depend on a variety of factors, and the potential financial implications of a deal are only one of them you’ll need to consider. That said, there are a few scenarios in which selling often makes a lot of sense.
The first of these is when you have a few years left before retirement. It’s important not to leave the decision to sell until the moment you’re ready to retire, as the process of selling a firm can take anywhere from three to six months, and sometimes longer. In addition, buyers will often want the seller to stay on for two to three years after the sale to ensure a smooth transition of the business, retain key staff, and facilitate the transfer of institutional knowledge.
The second optimal scenario is one in which you have real clarity on your firm’s financial future. For example, if your largest contract is ending in a few months, now might not be the right time to be negotiating a deal (and potential buyers might be hesitant to do so). Instead, it’s best to successfully recompete the contract and then go to market immediately following the award. This way, you’ll have a clear picture of your future revenue stream, making your business more attractive to potential buyers.
Lastly, you probably don’t want to make a deal when the executive team is in flux.
When you have a strong team in place that can assume a leadership role and help with the transition of the business, it’s more valuable. This factor is especially important to consider if you’re hoping to step away from your firm entirely (or at least minimize your involvement). Buyers will want to know that the business can continue to operate smoothly when you’re not around to keep things running.”
Mike Kapetanovic works with small- and mid-size government contracting firm CEOs on their M&A strategy. He can be reached at mike@growthlab.us
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