The Power of a 90-Day Pause in Business Sales
In the fast-paced world of business, taking a moment to hit the pause button can seem counterintuitive. Yet, for Mike Barker, a 90-day hiatus before initiating the sale of his company, House of Cheatham, not only safeguarded his business interests but also added an impressive $12 million to the final sale price.
Barker, who transitioned from a warehouse worker to the company's CEO, recognized the weight of his responsibilities not just to his family, but also to his employees. In 2021, as he contemplated selling the family-owned business, he deliberately chose to use a valuable 90 days to strategically enhance the company's market value rather than rushing into a sale.
Transforming Challenges into Opportunities
The House of Cheatham, known for its hair care products tailored for the Black community, faced significant growth and was flourishing under Barker's leadership. He faced a pivotal moment in 2021 when a buyer approached him. Rather than yielding to the pressure of a quick transaction, Barker paused, understanding the intricate dynamics at play. This decision was pivotal, as it allowed him time to assess and enhance the company's value.
This period also offered Barker an opportunity to reflect on the advice given by his Vistage Chair, Wade Bradley, about working 'on' the business rather than merely 'in' it. This shift in perspective proved invaluable, leading him to institute a quality-of-earnings report to verify the legitimacy of income streams from both domestic and international markets.
Building a Stronger Case for Sale
During the 90-day pause, Barker took proactive steps to bolster the business’s legitimacy in the eyes of potential buyers. One key element was the quality-of-earnings report, which highlighted the company's revenue streams, revealing that 40% of its earnings came from international sales. This strategy reassured banks and investors about the sustainability of income, making the company more attractive.
Additionally, Barker commissioned an environmental study to ensure the property was free of contamination risks, showcasing diligence and foresight to the buyers. These preparatory actions demonstrated responsible management and increased confidence in the enterprise's operational integrity.
Investing in Relationships: Employees as Key Assets
One of the standout aspects of Barker's approach was his emphasis on employee loyalty during this transition. He made it a priority to keep his team informed and involved throughout the process. When pending the sale became apparent, he promised his employees an extra year’s salary and a substantial tax-free gift. This gesture paid dividends, as it built trust and admiration between Barker and his staff.
“Everyone of them started to tear up on me,” Barker recalled. “They had their spouses there, too. It was one of the best things my wife and I did.” This level of commitment to his employees not only conveyed his appreciation but also ensured a smoother transition post-sale.
The Results of a Calculated Delay
After the thorough enhancement of the business was complete, Barker successfully finalized the sale of House of Cheatham for $110 million. The $12 million increase compared to previous offers wasn't just a financial win; it was a testament to the worth of strategic planning versus hasty decisions.
With the sale concluded, Barker ensured that his family, employees, and shareholders were all taken care of. His children each received stock totaling over $1 million, and he set up a legacy of support through a $4 million endowment to Clark Atlanta University, fostering future generations of Black entrepreneurs.
Lessons Learned: Takeaways for Future Business Leaders
Barker's story underscores invaluable lessons for CEOs and business owners contemplating a sale:
- Know Your Worth: Preparing your business before presenting it to potential buyers can drastically affect its value.
- Focus on Employee Relations: Transparent communication boosts employee morale and loyalty, which are essential during transitions.
- Hire Experts: Engaging legal and business advisors can provide crucial insights that enhance the sale process.
- Pause for Progress: Taking time to reflect and implement necessary changes can lead to significant long-term benefits.
Barker's decision to take a strategic break, culminating in a highly profitable sale, serves as an insightful guide for current and future business leaders: sometimes, the best decision is to pause, reflect, and act thoughtfully before launching into significant actions.
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