Basic Situation
A client, a long-time owner and operator of a manufacturing company, approached us with the intention of liquidating his business. It was an established company with no debts, generating an annual revenue of over 20 million CZK and an EBITDA of approximately 4–5 million CZK. The company had a stable customer base and a solid market reputation.
During a personal meeting, we asked the client why he was considering liquidation instead of selling the company. He responded that running the business was no longer worth it for him and that nobody would buy his company anyway. After decades of intense work, spending over 12 hours a day in the business, he was exhausted and wanted to finally enjoy some peace. It was clear that frustration and burnout were the main reasons behind his decision.
Our Solution
We convinced the client to prioritize selling over liquidation. We pointed out that, given the company’s financial performance and established processes, it could be attractive to buyers and that he could receive a substantial amount of money, which he wouldn’t get through liquidation.
Preparing for Sale
We started by creating a teaser—a brief document presenting the company to potential buyers. Next, we conducted a comprehensive business valuation to estimate its market value.
Identifying Key Issues
During our analysis, we discovered that the client was not only the company’s managing director but also handled technical service, warehousing, HR, and various administrative tasks that he should not have been doing. This “key-person dependency” significantly reduced the company’s attractiveness to buyers. In essence, the entire business relied on one person.
Finding Potential Buyers
We actively reached out to potential buyers, including:
- Competitors
- Investors seeking established businesses
- Private individuals with entrepreneurial ambitions
Challenges During the Process
- Client’s Frustration and Burnout:
Every unsuccessful attempt to sell only reinforced the client’s belief that shutting down was the best option. The pressure to find a quick solution kept growing. - Time Constraints:
The original two-year timeline for the sale was shortened to just six months, as the client wanted to exit the business as soon as possible. If the sale didn’t happen within this period, he would shut the company down. - Owner’s Key Role:
A significant portion of the company’s value was tied to the owner’s personal involvement. Buyers were concerned about whether the company could function without him.
Outcome
After intense negotiations, we successfully found a suitable buyer—though at a lower price than the company could have achieved if there had been more time and if the business had been managed independently of the owner. The transaction was completed within the client’s deadline, and the company continued under new management instead of being shut down.
Was it luck or our expertise? Hard to say. One thing is certain: selling a business that is entirely dependent on its owner is a challenging task—sometimes even impossible. However, if the company had been run by a management team, the sale would have been far easier.
Don’t Underestimate Preparation for the Sale of Your Business
While strategic preparation should be a part of everyday business management, it becomes even more crucial when planning a sale within the next few years. Now is the perfect time to start delegating responsibilities and reducing your operational involvement.
If you’re unsure how to do this, don’t hesitate to reach out to us. We will gladly assist you and connect you with experts from JPF Czech s.r.o. (contact: Ivo Chalupský, Commercial Director, ivo.chalupsky@jpf.cz), who specialize in this area. With their experience, they can efficiently prepare you for a sale by helping you transition out of daily operations, ultimately maximizing your company’s value.
Proper preparation can significantly increase the final amount you receive for your business.
