“26.2” – How Preparing Your Business for Sale is Akin to Preparing for a Marathon

By John Herubin, Managing Director

As we enter into a new year, many will consider a number of resolutions (personal, physical, spiritual, professional) that are intended to improve that person’s life in 2023.  If you watch any amount of television you will notice that the preponderance of popular culture New Year resolutions are focused on weight loss and fitness.

As I witness this phenomena it occurred to me that committing to a fitness goal (say running and completing a full marathon in 2023 – 26.2 miles), can mimic the preparation of an owner and their business for a sale process.

Don’t be confused.  There are days I dread driving 26.2 miles and this is NOT one of my personal 2023 resolutions, although I do know a number of friends and colleagues that have undertaken and completed this daunting challenge.

Years ago I naively assumed that someone could jog five miles a day for a few months and show up at the starting line in Boston to give it their best shot.  Fast forward to today and I marvel at the number of training regimes, time required, and sophisticated fitness monitoring apps available to ensure that a person will successfully complete a marathon.  Similarly, in order for a business owner who is considering the sale of their business to achieve a successful outcome, a significant amount of “training” or preparation will ensure the best outcome to complete this “race”.

A well-run process to sell a business can often take 6-12 months (which can seem like a marathon even to a knowledgeable owner).  Speed/timing to completion is a critical element in achieving success.    The owner that has prepared for this journey will have the capacity to endure both the physical and mental stress that accompanies this process.  Just like in a marathon, you will be competing elbow-to-elbow with potential buyers, their advisors, and some instances with other business owners like you trying to sell their business.  Adequate “training” and preparation will help you separate from the pack and move ahead in the race.

There are aspects of marathon training that I see mirror certain key aspects for the preparation of a business sale:

• Weight Training = Management Strength

Dedicated marathon runners know the value of whole-body muscular strength, in addition to lung capacity, to carry them through the punishing hills and tough weather conditions that exist in most races, as well as avoid injury.

Developing key employees to augment and diminish reliance entirely on the business owner’s involvement to successfully run the business will enhance the attractiveness and value of the enterprise.  This “bench strength” gained by delegating responsibilities will help distinguish the business and keep the process/race moving.

• Distance Training = Preparing Detailed Financial Materials

Most runners will methodically build-up their distance capacity in the months prior to a marathon.  This steady activity will enable them to know that they will have enough energy and “gas in the tank” to complete the entire race.

Likewise, the business owner (in conjunction with his deal/race team – more on this later) must review their historical financial records and business reporting to demonstrate the growth and profitability of the business.  Going back several years and analyzing product/service/customer/vendor mix, profitability margins, and uncovering potential future growth opportunities, will entice potential buyers to see the staying power and continued endurance of the business model.  It also provides the owner an opportunity to enhance prior business practices and improve areas not previously a focus of the business.

• Speed Training = Quality of Earnings (QoE) Assessment

Many distance runners will intersperse speed training in conjunction with their distance training to create balance and enable them to occasionally sprint when the marathon course or competition dictates.

This activity can be equated to an owner deciding to undertake the preparation of a Quality of Earnings report with a CPA just prior to beginning a sale process.  This exercise resembles an audit but is usually more focused in scope (i.e. confirming adjusted earnings, reconciling existing financials with GAAP accounting, aligning earnings for project-based businesses).  It can uncover areas where the buyer will encounter questions from potential buyers, and enable the business owner’s team to be better prepared to answer those questions and keep the process sprinting towards the finish line.

• Nutrition = Assembling The Deal Team

The body is an incredibly complex engine and most experienced runners know that eating the proper foods/fuel leading up to and in preparation for a race is crucial to a peak performance.

This aspect reminds me of the business owner assembling the proper professionals to prepare for the sale process.  This includes a seasoned CPA to assist with financials and tax planning, an attorney that is primarily focused on merger and acquisition transactions, a financial advisor that can assist with pre and post-transaction wealth management, and a seasoned investment banker to guide the preparation, marketing, and negotiations of a sale process from beginning to end.  An owner that ignores this advice and tries to sell their business without this team in place is like a runner eating too much or too little of the proper food the days prior to the marathon, or not being properly hydrated. The guidance, like nutrition, provided by this team will sustain the owner through the inevitable rough parts of a process (“hitting the wall” in runners language). The pain may result in lost value in addition to painful cramps.

• The Finish Line = Peaking At The Right Time

Marathon runners who have completed multiple races know that all the above steps in the correct sequence will result in a personal best time for most races.  The exhilaration of finishing a marathon (I’m told) is an emotional and physical high that is not experienced by many.

The “high” we are most familiar with is the immense satisfaction of one of our business owner clients that has prepared for the sale process as outlined above and achieved their “personal best” in value and or terms for their own wealth as well as that of their family, key employees, and community.  Hitting the finish line in our process doesn’t (normally) involve physically collapsing, but our clients know the happy results would not have been possible without the disciplined “training” we provide.

You are more likely to see a “0.0” sticker on the back window of one of my vehicles than the traditional “26.2” or “13.1” (although I do speed-walk a treadmill).  I greatly appreciate the preparation and dedication it takes to properly prepare and successfully compete in a marathon.

Our team is quite familiar with the “training” process that enables our business owner clients to run the race of a sale process that results in an outstanding outcome.