As a business owner, you’ve probably had more than a few down days. After a particularly bad day – or week or year – it’s only natural to start thinking about packing it in and selling your company to the first decent offer that comes your way. On the other side of the coin, it can be easy to mistake a string of a few good days as a sign that you should keep plugging away even if other market factors aren’t really swinging in your favor.
Before making that all-important decision of whether or not to sell your business, take a step back and look at the situation from as many angles as you can. While you may be worried about facing a cold case of seller’s remorse later down the line, you also don’t want to miss the chance to reap the rewards you’ll receive from selling your business at the most opportune time.
10 Factors to Consider if You’re Thinking About Selling Your Alarm Company
Start your own personal evaluation of your business situation by asking yourself the following questions…
Want all our insights and advice in one place? Download our informative ebook. It’s FREE and filled with industry advice on when to sell and how to get a premium price for your business. Then, continue reading below for 10 questions to ask yourself when weighing the decision to sell.
1. How comfortable are you with the up-and-coming technological advances in the security alarm industry? The Internet of Things: smart homes, remote monitoring and management, multi-connectedness, integrated devices… There’s a lot going on in the security alarm industry right now. With the recent purchase of Nest for $3.2 billion, even mega-corp Google is dipping its toe into the home security market. What types of products and services will customers expect five years from now? Will you be able to deliver?.
2. Do you still enjoy going to work every day, or do you look for any excuse possible to avoid the office? While you shouldn’t make your decision based on a few bad days (or a few good ones), it is important to take your general attitude into consideration. If you no longer have the passion and drive that you did when you first started your company, your bottom line is eventually going to suffer. Not only will that affect your current RMR, but it could also bring down your overall business value and negatively impact your future selling price.
3. What are the short-term and long-term economic outlooks in your geographical location? Are the neighborhoods you service on the upswing or on the decline? If your pool of potential customers is starting to shrink or if income levels and employment rates are going down, you may want to get out of the security business before you start suffering from diminishing returns.
4. What is the maximum number of years you want to wait before definitely selling your business? You’re not open to the idea of selling your business today, but you know you definitely want to be out of the game sometime within the next 10 years. Will you be able to increase the value of your company during that time frame, or would it be better to cash out now and use those funds for more lucrative opportunities?
5. How much would you need to reinvest in your company in order to go head-to-head with your top competitors? Even if you do have enough equity to make some major upgrades and give your competitors a run for their money in today’s world, you could be faced with this same scenario again in a few short years. Will you be able to recoup this current reinvestment before it’s time to start planning the next one?
6. Is it currently a buyer’s or a seller’s market? What types of multiples are other sellers receiving at this time, and are those rates likely to go up or down in the near future? This can be a tough area to research on your own, since your competitors are unlikely to want to spread this information around – and even if they do drop a number here or there, they may be embellishing a bit. To get a more accurate analysis of the market and an unbiased valuation of your security business, contact AFS for a free consultation.
7. Are you diversified enough to weather unexpected changes in the marketplace? Does your client list include a good mix of residential and commercial accounts, and are you offering a wide enough range of services? If not, your future plans could be easily disrupted by outside forces. Selling now may be the best way to deal with those vulnerabilities.
8. How happy are you with your current staff? Every business owner has staff problems from time to time, but if managing your employees seems to get tougher with each passing day, this should be a key consideration point when deciding whether or not it’s time to sell your company.
9. How strong is your current foothold in your geographical location? Is your business reputation starting to slip a bit because of a couple of poor customer service experiences? Are you facing more competition today than you were a few years ago? If you need to really ramp up your marketing expenditures just to achieve non-negative growth, you may have reached the tipping point where selling your business is your best option.
10. What are other security alarm business owners doing? Are other companies in your area making major investments in new technologies, or are you starting to see a lot of new competitors enter the market? Even if you might be willing to reinvest enough in your business to keep up with the competition, there’s another point to consider. Since they’ve already demonstrated they’re looking for expansion opportunities, this may be the perfect time for you to sell to them and receive top dollar for your accounts.
What Should You Do First?
Before making any decision, get in touch with the experts at AFS and discuss all of your options. Not only will AFS give you an unbiased, free valuation of your security business, but they’ll also be able to advise you on current market conditions and help you get the best price when and if you do decide to sell.
© Rory Russell and Acquisition and Funding Services, 2014. Unauthorized use and/or duplication of this material without express and written permission from the author and owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Rory Russell at AFSSmartFunding.com with appropriate and specific direction to the original content.