How to know when to sell your business: 4 common scenarios.

By: Anna Brumby White

You’ve spent decades building up your septic and water services business. Through dedication and hard work, you have created a legacy. Looking back to the initial investments of money, time and energy, the hard work, and long hours of providing quality service and keeping customers satisfied, to training and building a team to whom you can delegate – building your business has been a 24/7/365 endeavor for you and your family. It is the most valuable asset you will ever sell. So naturally the idea of preparing to step away from it may be daunting, overwhelming, and even emotional.

However, if you plan correctly, it can be the best thing for you. Planning your exit puts you in control of your future and allows you to sell when you want to sell and not when you must sell. Many business owners try and “time the market”. Unfortunately, that usually doesn’t work. Timing often boils down to when you are ready, when the business is ready and making sure that you have a plan for after the sale of the business. So how do you when the time is right? We previously looked at why brand management is critical in the septic and water service industry. With your brand successfully established and its reputation secure, deciding when to sell your business can come down to several different factors – and it’s an incredibly personal choice.

Reason #1: You’ve reached a crossroads in life.

It goes without saying that no matter what business you’re in, we all reach a day when we need to take stock of how much longer we want to remain there. That can be due to changes in your family or your health, a need to relocate, or a dream of retirement. Some people may simply start to feel like they’ve lost their passion for running their own business. And if you don’t have a family member ready to take over, then you will have to decide whether to sell your business, convert the business to an ESOP, find a buyer on your own or heaven forbid close shop. You’ll need to understand the ins and outs of mergers and acquisitions (M&A), how the valuation of your business will proceed, and how to best position your business for a complex transaction. Guidance from an experienced M&A team will be critical – but we’ll get to that in a moment.

Whether a sudden change or an approaching milestone, any of these might be an impetus to think about selling your business. Most business owners, especially in the water sectors, have been inundated for years by private equity groups looking to invest in their businesses and you may have even been approached by a competitor. Having a quality business in a growing market with strong margins, a quality workforce and steady recurring revenue stream has made your business a desirable target. However, when you engage in negotiations with one buyer, you diminish your negotiating power significantly and wind up agreeing to terms that benefit the buyer and not you the seller without even realizing it. To truly understand what your business is worth and what your needs are, it’s best to undergo a competitive auction process to look at multiple buyers to make sure the terms and chemistry is right for you and your employees.

Selling your business can be overwhelming and emotional, so having a professional guide you and negotiate with multiple potential buyers on your behalf puts you in the driver’s seat. It can be a long and seemingly invasive process, but as we stated before, this is the largest asset you will probably ever sell. So why wouldn’t you take the steps to make sure you get the maximum value at the very end of this lifelong journey?

Reason #2: The Challenge of Maintaining a Competent Workforce.

You spent years building your business, most likely through word of mouth in the early years before ever having a marketing budget. Delivering quality service kept customers coming back and committing to ongoing service agreements. As you grew, you trained and added new employees to the company culture you carefully crafted to make sure your employees felt like they were part of the enterprise; your company wasn’t just another place to work. In recent years, if you have found it has been harder to find and train competent new employees and maintain low turnover rates, you’re not alone. According to a study by SCORE in 2023, two of the top three concerns for small to mid-size business owners are 1) hiring the right talent (61%) and 2) retaining and motivating employees (33%). A strong workforce translates to more productivity and efficiency, in addition to better quality of service and workplace morale. Many businesses owners cite burnout of having to constantly battle bigger companies that offer higher pay and better benefits as a way to retain the best employees.

While you love the company you have built, the day-to-day grind may be weighing you down and spurring you to think about making a change. After decades of building your legacy, you might be thinking it’s time for a new owner to take on some of these challenges.

Reason #3: The industry is changing, and competition is growing.

The industry can also dictate when it’s time to bow out. Septic and water services businesses have to keep pace with new technologies changing the way they operate, and with those advances come added expenses – not only the costs of new equipment, but investments of time in training your employees on its operation and in making the changeover to new systems, tools and machinery. There has also been an influx of new companies entering the septic and water service space looking to capitalize on the need for new infrastructure and replacement systems for aging systems. At what point do continued investments become too burdensome to make it worth your while and for the ongoing threat of a smaller piece of the pie? That is a difficult decision to gauge, but if your business isn’t able to evolve, you might think about selling it to someone looking to take it to the next level.

In addition, industry regulators may force the hands of long-time business owners. Whether for employee safety, customer considerations, or environmental reasons, even the most well-intentioned regulations in water services can sometimes make it more difficult to run a business efficiently. It may not be the only reason you choose to sell, but in combination with other factors, the regulatory environment can certainly be part of the bigger picture.

Reason #4: You’ve reached your goals.

Maybe you started your own septic and water services business because you wanted something you could pass on to your children. Maybe it originally started as a side project that you hoped to one day grow into self-employment, and it carried you through to retirement age. You might have started out with certain financial goals or with plans to build your team to a certain size or level of expertise, and having hit those targets, you’re ready for life’s next challenge. If any of these apply to you, congratulations! You’re among the fortunate entrepreneurs who persisted long enough to see their dreams come true.

Now it’s time to enjoy the financial fruits of your labor – and securing the help of seasoned M&A professionals can help you maximize the return on all the investments you’ve made in your business from the very beginning. With a team of over 50 advisors and more than 40 years’ experience in mergers and acquisitions, FOCUS can help you navigate the entire process from start to finish, ensuring the most favorable terms at the closing table and for the future of your business and employees. Preparing you and your business for sale takes time and planning. At FOCUS, we work with business owners long before they reach the time of going to market to make sure we can help them be in the strongest negotiating position possible when selling their business. After decades of hard work, we want our clients to feel like they received the most value out of their business. Reach out today for a consultation – we’d love to learn more about your business and your goals!