Fall in Love with a Person, Not Your Company
Valentine's Day is a time for flowers, chocolates and romantic dinners with the one you love. Just make sure that your loved one is a person and not your company!
If you want to be successful, you must be passionate about your business. Perhaps you started your company, or bought it, or maybe you work in a family-owned business, and you deserve to be proud of the value you have created. But don’t fall in love with your company, because it can blind you to reality.
When Saying Goodbye is Worth Your Effort
Fortunes change and business fluctuates, and there could be someone out there who believes your company is worth more than you do. Marriage is "till death do we part," while owning a business is more like "till status quo demands that we change, buy, sell or die!"
A few years ago I was retained by the owner of a building products company who had decided to sell. His father had started the company over 50 years earlier, and the current owner had grown it by tenfold since assuming control. He was taking millions of dollars out of the business each year and living very well. What wasn’t to love about that? Plenty, as it turns out! Fifty percent of his sales were to one customer. The industry was highly cyclical and was at or near the top and other industry participants, always eager to expand their product lines and customer relationships, wanted his company. While the marketplace is discerning and constantly adapting to conditions, it is not as loyal as a faithful bride.
He decided to sell and got top dollar for the company. One year later, as the housing market was in free-fall, the company’s revenues declined more than 20% under the new owner and profits were down over 50%. The former owner was comfortably invested in low-risk securities and had turned his commercial real estate hobby into a whole new enterprise.
Fortunately, he was objective about his company. He was passionate, yes, and lived his business 24/7. But he didn't allow his passion, dedication and commitment to obscure sound business judgment.
Compare the previous positive outcome with another deal where the owner was too "in love" with his company. The owner of a 30-year-old construction company was contemplating a sale. We analyzed his operations and presented him with a sound, well researched business valuation. The owner was pleased with the valuation and hired us to pursue a transaction. We scoured the market and found a European buyer who was willing to pay full value for the company. However, as sometimes happens, the owner had fallen in love with his company and its prospects. A new market the company had recently entered was flourishing, the backlog was growing, and a large development project was planned. He decided not to sell.
Two years later the company was forced to exit the new market and postpone the development project as business plummeted in the recession.
How can a business owner avoid being blinded by love? Hire an outside advisor who will provide objective advice, based on analytics rather than emotions. Take a step back and remember that you should love people, not your business.