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When You Can’t Recoup Your Losses, Exit Gracefully
By Karen Dry and Linda Hebert

The final article in a series on the tough choices business owners may have to make during the housing downturn. This article is an excerpt from Building Women magazine.

The daily stress of keeping the business going and finding new streams of revenue has become just about too much to bear.

You’ve evaluated your dwindling bank account and long-shot prospects and cannot see even a glimmer of light at the end of the tunnel.

It may be time to call it quits.

Deciding to sell or close your business is not an easy choice. You’ve invested a lot and have clients and employees who depend on you.

The key is to exit gracefully on your own terms rather than have the rug pulled out from under you.

“It was difficult,” said Kellee Krause, president of Integrity Service Solutions, Inc., Murrieta, Calif., who recently closed her consulting business, which provided third-party warranty and customer service for builders. “I kept looking for ways to avoid the inevitable.”

“Finally, I realized the company could not stand on its own any longer,” she said. “I didn’t want to bankrupt the corporation, but I had to find a way to take care of my clients and employees. I wanted to honor our contracts, but was faced with making a decision that would mean I could not deliver.”

Krause honestly approached her clients and settled contracts with them. She was also able to place all but three of her employees in positions at various clients’ firms. Then she liquidated what she could and paid her debts.

So what steps do you need to go through so your company can die a less painful death? Here are some guidelines to help.

There are companies that seek to acquire companies that are failing in difficult times. Once you decide to sell, look into these options:

  • Set a Value. A general rule of thumb for selling a company is to price it at about three times the net gross revenue. However, right now your company is on a downturn and may not have the same value it had a year ago. This is where hiring a good business broker is advantageous. For a directory of established business brokers, visit www.businessbrokers.net.

  • Find a Buyer. Review your list of competitors and you’ll find you already have a pretty good starting point for a potential buyer.

    If you’ve been a worthy competitor in the past, your competitors know your worth. If you’ve been respectful in your business dealings, most likely you have something to offer.

  • Find a Partner. Find a potential business partner or partners to buy into your business. Locating an investor is another solution to exiting gracefully and can let you keep your hand in the company operations, but in a diminished capacity.

    It can even be the silver lining for many because, with new partners or investors, you can reorganize your company to focus on what you like to do most and have your future partners take on areas of the business that were not as enjoyable or where you have no expertise.

  • Investor/Silent Partnering. Finding an individual or another company to invest money into your business isn’t always easy, but it can be worth the hard research if the partnering is indeed a good fit and the terms are unequivocal.

    Be prepared to show your company’s financials, good or bad. No investor or silent partner will come to the table without all your assets and liabilities in plain view. For more information on this, visit www.businesspartners.com.

  • Majority Partnering. Majority partnering is a situation in which a partner buys into a business, purchasing a major share (if not all) of your company’s assets.

    This individual or company then assumes the daily operations of your company and you will either be asked to step aside or most likely be placed in an area of your business that you mutually decide is appropriate.

  • Liquidation. This option is when all assets of the company are liquidated to anyone who will buy it. There are companies that specialize in helping liquidate company furnishings, customer bases and other assets ― however, be warned that liquidators receive on average 50% to 70% for these services.

    You can do it on your own, but liquidators have a vast consumer base and can even help you with inventory, storage and shipping your items. Any money retrieved from liquidation can then be used to pay off any creditors or loans as necessary.

  • Walk Away. If things have gone too far downward, you may be forced to bankrupt your company. The legalities of going through this process are varied, and anyone in the know will tell you to seek the advice of a lawyer specializing in corporation bankruptcy.

    For more information on bankruptcy and to investigate if this is the right option for you, visit www.bankruptcy.org.

NAHB Women’s Council Vice Chair Karen Dry is president of Garrett Interiors, Inc., an interior design company based in Westlake Village, Calif. specializing in model home merchandising along with residential, commercial and hospitality interior design. For more information, e-mail Dry, or call her at 818-991-3487.

Linda Hebert is the chair of the Women’s Council communications subcommittee and president of Diversified Marketing & Communications, of Pleasanton, Calif. For more information, e-mail Hebert, or call her at 925-577-5300.

NAHB Has Nearly 300 Resources to Help You Run Your Business More Profitably

Go to NAHB's Business Management Tools Web pages (available to members only) for instant access to nearly 300 timesaving, moneymaking and cost-cutting business resources to help you run your business more profitably. Get guidance on accounting and financial management, business strategy, computers and information technology, customer service, human resources and more.

Resources are added weekly, so bookmark www.nahb.org/biztools to go directly to these vital business management resources.

Local and state home builders associations can link directly to www.nahb.org/biztools from their Web site and give their members instant access to these resources. It will make your HBA's Web site the place to go for the information and guidance that members need to succeed.

Deliver Exceptional Customer Service

Take the “Profitable Business Through Quality Practices” course from The NAHB University of Housing and learn key strategies for providing a quality building/remodeling experience for home owners.
Topics include meeting the quality challenge with customers, competitors and within your company.

To find out where upcoming courses are being held, click here, or call 800-368-5242 x8154 for more information.

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