Michael Bosma: Don’t give up – sell your business (Voices)
Covering Your Assets
Let’s face it. Many business owners are just plain tired.
Many were riding the wave until the crash of the Great Recession in 2008 and beyond. Resilient, they clawed their way back. Frankly, few had little options. Their 401K was decimated. Their real estate debt was more than the value of the underlying real estate. They had personal guarantees on their debt.
When I got my first regular “gig” on talk radio, Jon Sanchez, Jamie Kalicki and I (with a host of others) regularly were pundits on Jon’s Saturday morning radio show. Jon created what was to become known and The Wealth Advisors. We would troubleshoot people problems real time.
For those not wanting to call in, we would sit down with them and offer to help. The phones would light up during the show with people trying to find a way forward.
It was the second half of 2010, and after years of bankruptcies, loan defaults, business closings, etc., people had lost their pride, and would call for help.
On average, we had 10 calls each Monday of people needing help. Some we charged, others we didn’t. It was us pouring our lives into people’s misfortunes with the sole intent of helping them out of the jam they were in.
As a CPA, I have found that I had an eye for seeing trends, both in data and life. As my introduction stated, the common trend was their 401K was decimated (or withdrawn) to keep their life afloat; they worked with their lenders to short-sell or have their property foreclosed; and they did debt workouts with lenders — and it may even have resulted in bankruptcy.
What I learned in this season was that in every situation, there was a way forward for the informed. It didn’t matter how dire the situation was, there was always a way forward. This was especially true for business owners. We would brainstorm and reengineer and find a way.
Fast forward a decade. These same business owners have learned the lesson. They grew their businesses, they were reluctant or refused to sign personal guarantees, they refused to withdraw their 401K to keep their business afloat.
They received their PPP and brought back the team with an idea to get the business going again. They are now running out of PPP, and their cash flow forecast is starting to create a very dim picture for the future.
I believe that many are thinking of throwing in the towel and calling it quits. Because you have no personal guarantees on your lease or debt, you can simply fold up shop and ride off into the proverbial sunset of “retirement.”
The missing link is that there is intrinsic enterprise value in the business, even if it is closed. My stomach turns every time I see an article in this publication that shares with the reading public that yet another business has chosen to close.
The reality is that there are sources of non-recourse capital to build a bridge to find a buyer. There are buyers that are knowledgeable of your business, and can move quickly to get a deal done.
The only impediment to an owner’s success is the owner’s ego. Many owners are so connected to their business that they cannot get out of their own way, even to provide a way forward for their team, their creditors and even themselves. Ego is a thing.
My encouragement to owners is to be willing to acknowledge that there is someone else in the universe who can take the business to the next level (or at least keep the doors open and the team engaged).
Seek to find a viable suitor who can make the magic happen. When you are in a place of closing the doors, it’s powerful because your inflated belief in the value of the business must reconcile with the harsh reality that it could be zero.
Selling for more than zero and providing a way forward for the team and your creditors is a win.
Michael Bosma, CPA, is Principal-in-Charge of the Reno office of CliftonLarsonAllen LLP. His NNBW column, “Covering Your Assets,” focuses on effective planning strategies for every business owner. He’s also the host of “Bosma on Business,” which airs Saturdays at 10 a.m. on Newstalk 780 KOH. Reach him for comment at firstname.lastname@example.org.
“The thing that I like most about entrepreneurship is I can work toward something that I’m passionate about and be at the forefront of the change that I want to see happen,” said Priyanka Senthil, a senior at Davidson Academy in Reno and co-founder of startup company AUesome.