This year I thought I’d change things up a bit on the blog. I will still be publishing monthly but will alternate between Leadership subjects and Industry topics.

This month I am writing about selling an equipment rental business.

There are a lot of successful small and medium-sized business owners in Canada who have reached a stage where they are thinking of their strategic options. Not everybody has a family member to take over, so for many of these owners selling the business is an option to be considered.

There’s a lot to think about when looking at this option. I have worked on and completed many transactions for businesses over the past twenty years and have learned a few things that I would like to share.

My first transaction was the sale of our family business, Ray-Gordon Equipment, in the late 90s. I was in my early 40s at that time, and our team had grown the business significantly over the 13 years I owned it, having acquired the company from my father in 1983.

I learned a couple of principal lessons about personal and corporate finance, mergers and acquisition strategy and business valuation. But surprisingly the most important lesson learned throughout this period had nothing do with finance.

It was a lesson about vision and happiness.

I had a vision for the future of the company after the sale that was not shared by my new owners. And worse, even though at the time I thought it was their problem, I later realized it was on me. In our discussions about the sale of the business to the buyers, I had focused on the transaction and legal issues, and had spent very little time getting aligned with the buyer on vision, strategy, and direction.

Lesson learned – Take your time and think about what the world looks like for you and your family and the people you work with after a transaction. The money is great, but it can’t buy happiness.

Cooper Equipment Rentals has completed 9 acquisitions in the last 8 years. I talk to owners throughout Canada all the time about their plans and what is important to them. We have great conversations, sometimes over a period of years – getting to know and understand each other and building trust. Sometimes these conversations lead to transactions, and other times we agree that we are not aligned in our goals, or maybe the timing isn’t right.

Valuation is always part of these conversations and leads to some of the most interesting discussions about people, facilities, brand strategy and market position, customer mix, fleet mix, fleet age, assets and liabilities, and transaction structure. The value of the business takes in all these factors and is, in some ways, a bit more art than science.

Sellers often want to start the conversation with the subject of valuation. “What is the multiple of EBITDA?” is one of the questions I get asked a lot. My answer is always, “That is where we will end up – but it is not where we start“. There is a lot to learn from each other about what is going to make everybody happy before we get to that.

Bottom line, if you are thinking about selling, or buying a business for that matter, make sure you know why. Talk to your family and trusted advisors – paint a picture of what your ideal result is from the get-go. Make sure your expectations are practical and reasonable and attainable. If you have a clear vision for what you want for yourself, your family, and your people, you are in a much better position to control the process and get the right outcome for you.

See you next month.

Doug Dougherty

CEO