By signcraft
Posted on Friday, October 18th, 2024
A reader wants to know: “How do I sell my sign business?”
Sooner or later, every shop owner is ready to retire or move on to another endeavor. Few of us have an “exit strategy” which is a plan for that time. We may have a notion of what we’d like to see happen, but it’s not a concrete plan with a timetable attached.
If you’ve sold your business, this reader and countless others would like to hear your comments on how to make it happen and your experiences with the process—both good and bad. If you’re working on your exit strategy, we’d like to hear that, too.
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I am starting to find the right person to take over my business. I have not found that individual yet. I have been in business for 40 years. I have a great clinetele base that is very loyal and I want to continue that service for them, after selling or slowing down… I dont want them to worry, and can rely on the same continued service.
I have ideas how to transition so it is easy and fair to both parties. I would love to hear everyones sstories, the pros and cons, good and bad… Would love to learn from others in the same situation
Cindy
DeZigns by Cindy
Hi Cindy..I am in the process of doing the same thing. Training someone to be “me” so my customers will get the same service. We are in a small town and pretty much the only sign company.
I’d be intersted to hear your transition ideas.
Kathy
KG Graphics LLC
As someone with a technical background, I have assisted multiple businesses with continuity ideas as well as ways to increase the value of the “book of business” for when a business is sold.
I have found that redundancy adds value consistently across multiple industries, including sign making. Make sure you have backup equipment, safety plans, and file backups of your customer, tax, and business files. Having an alternative to a paper filing system will ensure that if something happens to the physical location, the legacy of the business will remain intact. Having access to backup equipment ensures that the needs of the business can be met without having to wait for more equipment to arrive. The point is, have a plan A, a plan B, a Plan C, and a Plan D.
Strong documentation and repositories will also help to add value. You can use a system, such as Confluence, as a “business library” where all of your fonts, design libraries, clip art libraries, and pricing standards can be accessed as a resource by users in the company. And, because you paid for a lot of these items to use commercially, it will also help to value your business based on the contents available.
Nobody knows your business like you do, so try to document the procedures and policies as they are. This gives the customer a seamless interaction with the new owners of the company.
Try to build a foundation for internet marketing. Use Instagram, Facebook, Twitter, and websites to build your online brand. Marketers can be found quite affordably via Fiverr and they can help you market your brand on the popular web platforms.
When you hand the keys to the castle to the new owner, you should feel confident that they have all the tools they need to continue your legacy. I hope this helps!
I had a plan to sell my business that failed three times. I outlived my apprentices. At this time if someone wants a sign business they buy a computer and a printer/cutter and with a free program and knowing nothing about how to build a letter they can be in business. I’m sure glad I learned when I did.
After 49 years it would be hard to sell my particular business. I have a great customer list, but my signmaking equipment is decades old, and I still get to paint signs every now and again. My building is slowly becoming a man cave. Mrs. Mysse says I can retire anytime – I just can’t come home till after 5.
We received this comment from Mike Jackson via email:
Back in 1995, we sold our business in Jackson Hole. We were thinking about moving to a new small, but up and coming town in SW Colorado.
We got lucky! We put our house up for sale through a realtor, and the realtor came in contact with an “entrepreneur” who was interested in buying several small businesses in the town of Jackson. The residential realtor sent the interested buyers to us and we did all of the transactions outside of a business realtor. The potential buyers (a married couple) looked over our profit and loss statements and remained interested.
We demanded a cash sale, which they eventually agreed to. Lawyers wrote up the sales agreements, which went fairly smoothly. I agreed to a 5 year non-compete agreement. We listed off all of the equipment and displays that went with the sale.
The landlord agreed to work with the new owners, and our one employee agreed to stay on for a period of time (with a raise). Darla, my wife, agreed to work for the company for a couple of months at a fair wage and I remained available to answer questions for a month after the sale. I’d say that phase of the sale went smoothly during our exit period.
As it turned out, the couple filed for a divorce not long after the sale. Essentially their master plan to oversee several small businesses crumbled. My demand for a cash sale paid off. If we had agreed to get an up-front sum of money and financed the rest with them, it would have been a disastrous mess. More than likely we would have never received the balance of the money owed on the sale. The couple eventually sold the shop and it sold several times after that. The current owners changed the name a couple of years ago.
Even though we had planned on moving to Colorado, we were more or less forced to stay in Jackson for a few months to help with the transition. We ended up staying in Jackson, which was a good call. Prices of houses skyrocketed during the period from 1995 to 2022 and we were able to sell out at a nice profit, then move to Colorado.
I think the best exit strategy for most small shops (fewer than 5 employees) is to find a competitor to take over your customer list in exchange for being paid a % of sales for a number of years going forward.
Then sell any equipment the buyer doesnt want at auction. The reality is, unless someone thinks they can dramatically grow your business, they are looking at a break even investment for several years.
Selling your equipment gives you a cash nest egg and the % of sales is like an annuity.
WOW!.. Selling out!
I have to go back to 1976 when I decided to leave my native New Jersey and strike out for a new beginning in Colorado. It must be said that I’d had a transition in life at that tender age of 30 and was consciously following a higher power for the first time in my life. So, a lot of prayer & meditation was put into my decision.
I certainly needed to continue a livelihood wherever I would ultimately settle and I reasoned that IF I was benevolent in my transition, I might be likewise blessed where I ultimately wound up. SO, we sold our home and I worked out a deal with a fellow believer who was migrating east from Washington State I believe. I charged him a token amount… less than a thousand dollars as I recall and he took over my phone line and advertising for Arjay Signs. He also took some fixtures and some tooling that was too big to travel with me. Just as suspected, when I arrived in Colorado I got a job my second day here and then another, but after a few months realized that I wasn’t cut-out to be an employee anymore. So, with a new phone book AD and the issue of the new phone book in January, I was back in business in 1977.
So here we are, 47 years later. I’ve been in numerous permutations as Quality Signs & Designs with a small and then a large shop, gone through several boom trucks, 8 people at one point depending on my ability to generate sales and a QUALITY product and now, back to a one man show (with a VERY supportive spouse who is KEY in the computer end of what we do). So, if I decided to sell my operation, I’d need to contemplate just WHAT am I selling!? Goodwill? Accounts? Tooling, Computer files, a few old trucks? Certainly not my home & Shop as this is where we live!.. SO, consideration would have to be given to WHERE a buyer would set up!?
Ideally, my buyer would need to be someone familiar with the business, perhaps an established professional who wanted to settle in this region for a change of lifestyle. In my case, close to the Mountains. Preferably, NOT someone that needs to be taught 100% of EVERYTHING. Many shop sales hinge on the seller sticking around to show the new arrival the ropes. But, just how long can you hang around ?
Ideally, a large amount of cash changes hands but sometimes, the seller holds the note and residual monthly checks trickle in. Problem is, if the new owner doesn’t make a go of it, you’re stuck holding the bag. ( A friendly local competitor went through that scenario and had to open up shop again under a different name.)
Interesting as the dilemma is, my small operation would just be offering someone a JOB, albeit a well established reputation does offer a fair bit of equity.
It would be interesting to consult a business broker for an objective evaluation. It might be surprising. But then, what would I do with my time???
We received this comment from Bob Fiddler, Johnny’s Signs, Bedford, Indiana:
We all have put our heart and soul in building our business. I cannot count how many times I received notifications of sign businesses closing and auctioning off their equipment.
My situation was a family-owned business. My grandfather started and had some success. My father took the business when my grandfather was going to close it. My approach was to retain employees and build a reoccurring customer base. So you don’t necessarily need to print that but here’s my answer to the question.
It is the intangibles or blue sky that made our company very valuable. Although we didn’t have contracts on paper we had documented history of returning customers, a solid workforce and successful consistent growth.
Be very mindful of tax repercussions. Keep the value of assets as low as possible when putting numbers on your equipment. Allocate more towards the intangibles, noncompete, good will and sales growth.
You may have to negotiate this as the buyer will have benefits for the assets being higher. I definitely recommend a business sale consultant. Happy Retirement!!!
We received this comment via email from Rich Dombey, Rich Designs Inc., Hillsborough, New Jersey:
A few years back, I actually did have someone who wanted to buy my business. The lead came through one of my customers. He said that his worker wanted to buy my business when I was ready. I wasn’t ready and he was in no way interested in working a 70-hour week.
Three years ago, I took on a part-time kid whose parents I have known for many years. They said he loved signs and lettering. He lasted less than a week. People are fascinated when they see the finished project but have no idea the commitment and sacrifice that went into it. It’s a special breed of person that wants to learn the trade, and I am afraid with computers, wraps, and digital printing, that this is a dying craft.
Each sign company (lettering artist) has a different approach, and I think that the relationship they formed with their client base has everything to do with it. A trusting/personal/professional relationship creates a very strong bond between customer and business owner. Not to mention each customer has to be treated differently. Some more than others.
My guess is that you would sell your client list, computer files and computer equipment. The buyer would also have to work for a year with the seller, ghosting them on every job and slowly merging into the business. If it’s another sign company buying your business and client list, of course, that would be a different scenario.
Each ”Sign Business” is different. Sign design and lettering is such a personal business—it’s not nuts and bolts. Even though Brian Schofield’s shop [Lines and Letters Designs] is in the same county as mine, our client bases are at completely opposite ends of the spectrum. He is so specialized that I couldn’t imagine someone taking over his business.
I will be hitting the brakes hard this coming May but would still like to work and keep a few customers. I’ll be working less but will still continue doing the work I enjoy.
A lot of us are at the age where we will be retiring. A lot of really creative people. It will be a whole different landscape when all the greats are retired.
I am 68 now and have been running Keene Signworx for 40 years. I knew years ago I didn’t have a good exit plan but that was okay with me. I have always been a two person shop and so there would be no staff for a new owner. I still love the work and my shop and house are paid for and I saved for retirement so my plan is to just slow down and take only the work that interests me. I have cut my hours from decades of working 55 hours a week down to about 30 now. The only way I could see me selling this business would be to an already trained sign person that wanted to relocate.
I think about selling our business often now due to unforseen circumstances. Three years ago my wife of 45 years and business partner was diagnosed with a chemotherapy-resistant form of ovarian cancer after using asbestos-tainted baby powder most of her life.
Despite having to travel 225 miles each way every couple weeks for treatments, going through an experimental clinical trial, adverse complications from the treatments, COVID19, etc. We have persevered and our business has held its own.
I am the creative and far more experienced part of the team, but without her integral contributions the business likely couldn’t continue in its current form. She is the face and spirit of the business.
Two weeks ago, she suffered a life-threatening stroke and had to be airlifted to a hospital with the expertise to save her. If not for the rapid response of our clients at our local fire department, we’d have lost her.
Even with our daily challenges, our customers know they can rely on us and that we apply great effort and competency to every project no matter its size or value.
We’ve both owned other businesses relying on each of our skills and talents. Emily owned a successful restaurant but with a corrupt, crooked silent partner who killed it despite her efforts. We owned a successful bed and breakfast in Santa Fe, NM, for 8 years before buying our sign company in California.
My advice to others is similar to that already shared here. We’ve now circled back and looked at all the things and deficiencies we encountered after buying or starting our various businesses. You will likely never find your doppelganger in terms of skills, experience and motivation.
Our successor’s survival relies on our preparation and goodwill towards them, which is one of the most valuable assets we are selling them. If I hadn’t already had 35 years in our craft and the two us determined to make it work, we’d have likely failed.
Below market value prices, lack of file organization and secure off-premises backup, paying substandard wages, a scarcity of a competent, experienced labor pool, aging equipment and a lack of commitment to equipment upkeep all added to our initial challenges.
Once we became comfortable with the various equipment we purchased, I felt the previous owner’s monthly fee for continued support was a waste of money and a distraction from our efforts to reshape and expand the business. Our predecessor owns our shop building and 10.5 years later, we are still on excellent terms. He and his family have been very happy to see us succeed and provide them few worries about the rent or upkeep of the building.
Do your best to clean up all those phases of your business. Don’t overvalue tools and equipment. They all depreciate like anything else and you’ve enjoyed tax benefits since purchasing them. A potential buyer’s financial solvency matters far more than finding your twin in terms of creative skills.
Our egos drive us to believe nobody else could improve upon our business. There are lots of highly motivated, smart people out there. Vet them thoroughly and assist them in any way you can and your worries will be much lower.
I recently sold and merged by business with another local print business after running it myself for 14 years. I had 4 full time employees and 2-3 contractors I’d work with. We specialized in installations primarily, tons of fleet work, trucks, wraps, and of course signs but our stand out was our wrap work.
I got into this business because I like the artistic end of it, being creative and seeing the finished tangible product. And then seeing your work all over the city for years and years is extremely gratifying. But, the business end of it is what took all that away from me and I had to fall into that role whether I liked it or not.
Having employees is a blessing and a curse. I could not do it without them that’s for sure but what a headache it had become and stressful to boot. I lost interest in wanting to grow the business, I was fine with how it was but to stay up in the sea of sharks you must grow or die. So I decided to sell instead and that’s been great for me overall.
The difficult part for me is working here and now I’m not the owner and don’t call the shots the same way I used to. It doesn’t feel the same when it’s not yours. I do miss ownership but I don’t miss everything else that comes with it and the mountain of responsibility the kept growing every single day.
So, if you are ready to sell, get it while you can because you never know when the circumstances could change in an instant and the value can vanish in front of you. I can always buy or start another business but for right now I’m taking a breather from that. Good luck.
I’m currently in my second-time-around sign businesses. My first was from 1990-2000 (full-time), several years part-time prior.
My business grew from 1 customer to over 1,000 in a rural area of Central Virginia. I started as a sole-proprietorship and operated as such for 2 years part-time and one year full time, when I switched to an S-Corporation in 1991. I added 1 full-time employee and moved to a rented building in 1991. I ended up with 6 full/part-time employees in 2000 and had annual sales of about $285,000 at the end when I finally sold out.
My reason for selling was mental health as I am not the greatest manager of people. Customers, I’m great with; employees, not so great. I actually ran an ad in Signcraft Magazine in the summer of 1999, got an offer almost immediately, but turned it down after discussing with my minister and wife at the time.
The offer was for what I was asking, $220,000. At that time I pulled a $42,000 salary, had paid health insurance and a retirement plan, but my business was negligibly profitable. I was basing the selling price on my strong and steady cash flow and good will/return customers.
After my employees figured out I was selling, several key employees quit and I could not fill their positions quickly. I also leased equipment that only they knew how to operate effectively. So I was really in a bind, tried to make it work, but eventually reached back out to the original buyer prospect and sold a year later for $120,000.
After paying vendors and the IRS I basically broke even but was very glad to be done, at that point in my life. I was 39 years old.
Here are the lessons I learned. First, I could not find a professional accountant to help me price the business, with most people saying since I operated at basically breakeven there was nothing to price except assets and good will. My bookkeeper said I had great cash flow and higher sales than others in my type of business.
So, find someone who knows how to price a business. Not sure where you should look for that.
Second, realize you may incur income taxes on past losses if you are an S-Corp and you do not kill the corporation. I wanted to keep my corporate entity in order to start up again later in a reorganized way. So I was hit with a $35,000 tax liability after the sale.
Third point, hire a good business lawyer and get paid in full at closing. Do not sell in two payments. The entity I sold to disputed my accounts receiveable and I ended up losing thousands of dollars of the final payment.
Fourth thing: continue on as an employee if you can for 6 months or a year and keep the non-compete clause to a year or less. I settled for a 5-year non-compete which I later regretted. I did stay on as an employee to help with the transition and it proved helpful to both parties.
Fifth, keep any news of a business sale completely confidential if you have employees in case something goes wrong and you don’t end up selling.
Sixth, if you’re stressed out, by all means sell as soon as possible. It felt so much better to be rid of the headaches involved with management although I missed the freedom and prestige of owning my own business.
I worked in the industry for 15 years and then in 2015, started up again using the same corporate shell with a different name. I did not have to spend money incorporating again, and I did not have to retake my state contractors exam for licensure. Plus after the no-compete period was over I made side income still making and selling sign until restarting again full time.
I have been operating as a one-person shop for almost 10 years, am making more than I ever thought I would make in salary and fringe benefits, and work from home! Now, at age 63, I’m thinking about retiring in 2-4 years and will have to sell out again.
The optimal plan for me would be to find a young person with a little experience in the trade who’d like to relocate to a beautiful rural but growing area and take over a successful sign company with many good, repeat customers! Maybe Signcraft Magazine will help in this endeavor once again! Who knows!!
I have a few local people interested in my future plans but no concrete exit strategy to date! I’ll enjoy reading the comments now to see what others say about it all!