Kevin Short - Sell Your Business for an Outrageous Price: An Insiders Guide to Getting More Than You Ever Thought Possible

Kevin M. Short

with

Kathryn A. Bolinske

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Library of Congress Cataloging-in-Publication Data

Short, Kevin M.

Sell your business for an outrageous price : an insiders guide to getting more than you ever thought possible / Kevin M. Short, with Kathryn A. Bolinske.

pages cm.

Includes bibliographical references and index.

ISBN 978-0-8144-3471-0 (alk. paper) ISBN 0-8144-3471-1 (alk. paper) 1. Sale of business enterprises.

I. Bolinske, Kathryn A. II. Title.

HD1393.25.S46 2015

658.164dc23

2014016982

2015 Kevin M. Short.

All rights reserved.

Printed in the United States of America.

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Printing number

10 9 8 7 6 5 4 3 2 1

To my parents,
Mike and Carolyn Short

Contents

Acknowledgments

First, I thank the many business owners who have trusted me with the sale of their businesses. Without them, this book would not be possible.

Nor could I have written without the support of my high school principal, lifelong mentor, and una donna Stupenda Sister Mary Ann Eckhoff, SSND (1930-2009).

I thank my family for their patience and support as I put in the long hours and many miles necessary to build my business.

I am grateful to Paula Reeb, my business partner and right hand in all of my entrepreneurial enterprises, for her support and counsel.

For prodding and writing assistance, I thank my writing partner and friend, Kathryn Bolinske. Without her, this book would not be complete, much less written as well as it is.

Finally, thanks to John Brown, whose friendship and writing inspired me.

For years, Ive been preoccupied by a nagging question: Why do similar companies sell at wildly divergent prices? While I admit that this question does not rank with What is the meaning of life? or What goes on in the teenage brain?, like those questions, it has given me its share of sleepless nights. Unlike those two profound questions, however, my ultimate question is one that I had hope I might one day be able to answer.

When I started my career as an investment adviser, I bought companies as investment vehicles for clients. I would analyze both the current and the potential value of companies using every available financial measure. If, for example, Acme Company and Beta Company were of similar value, theyd sell at roughly equivalent prices. But every once in a while, Id watch Beta sell for two times the purchase price of Acme. What was going on?

My job as an investment adviser was to find the best return for my clientsa task made easier if I didnt overpay for a company. So my interest in answering the question of why comparable companies sold at varying prices was limited to making sure I wasnt the one paying the Outrageous Price.

Note: Throughout this book, I define Outrageous Price as one that is at least two times the EBITDA (earnings before interest, taxes, depreciation, and amortization) multiple of an average company in its industry.

In 1991, I entered the world I occupy now: investment banking in the midmarket. I represented then, and do today, owners who want to sell their companies valued between $10 million and $150 million.

I chose investment banking as a career for reasons both practical and emotional. After I sold my investment advisory company to my employees, I spent several years running a number of companies I had purchased. While I loved the challenge of finding new sales outlets, increasing customer loyalty, and launching new product lines, I did not enjoy the too many hours I spent managing personnel. When the opportunity arose to sell my company (at a price that gave my family financial security), I debated. Sell, but then what would I do? Or stay, grow the business, and hope conditions would be favorable at a later date when I was ready to sell? After consulting my family and my advisers, I took the leap and sold.

For six months after closing, I spent time with my wife and our children, whom Id heard about but hadnt really met. I thought about what I wanted to do next and considered everything from full-time charity work to creating an incubator for business start-ups. I was acutely aware of the tremendous opportunity I enjoyed to choreograph the next step in my life, so I spent hours reading every book about decision making that I could get my hands on. I wanted to make sure I made the best possible decision as I took my next step, but I also wanted to erect a practical framework to support the intuitive way Id been making decisions throughout my life.

When a friend proposed over lunch one day that I join as a partner in her investment banking firm, I recognized that I had experience in both buying and selling companies as well as the financial analysis skills to do the work. I knew that I could bring valuable insights into how owners think because Id been an owner and would be again.

It wasnt much of a surprise when I began to observe the same phenomenon as an investment banker that I had as an investment adviser: Seemingly similar companies were selling at very different prices. Again, I wondered why that occurred and sought the data that might yield an answer. The companies Im talking about here, however, are privately held, so there are no public statistics to dissectonly veiled hints from former owners who hold their cards close to their vests or incredibly tall tales from owners boasting over cocktails.