It can be easy to get swept up in the romantic version of selling a business. You find the perfect buyer, conduct a quick and smooth exit, then put a cool million in your back pocket before retiring to a beach in the Bahamas.
Real life doesn’t always work out that way. Selling a business isn’t something that happens overnight: there’s due diligence to be done, accountants to be hired, fine print to be double-checked. You’d be hard pressed to find anyone who would call those things ‘romantic’, but they certainly are important. Business sales take time because a sale at the wrong moment, at the wrong price, or to the wrong person can be an expensive mistake.
That’s exactly what happened to Rachel Jesson, a South African entrepreneur who sold a family business through BusinessesForSale.com. In this unfiltered story, she tells us what went wrong with the sale – and gives some candid, real-world advice to other sellers. She also tells us how she managed to turn the business around for a successful second act.
Tip: If you're thinking about selling your business, you can create a listing on BusinessesForSale.com and test the market for free.
Selling the Business – From Overseas
Rachel inherited an event and catering business called Kate’s Party Rentals from her late mother, who set the business up in 1989. It was a long-running and stable business with established clients, which Rachel operated for more than two decades. But after she and her partner started a family, they planned to move from South Africa to the UK. The decision was made to sell.
Rachel was unable to find a buyer before the planned move date, and was forced to manage most of the sale remotely. This made due diligence a much trickier process, and meant that she was unable to meet the buyer in person before the deal closed.
She opted to sell the business using seller financing, where part of the asking price is covered by the continuing profits of the business. Seller financing is an appealing option for buyers, because it often means less third-party finance is needed up front – but it carries an element of risk for sellers. The business needs to continue to be profitable in order to cover the asking price, and that business is no longer under your control.
Tip: For more information about financing a business purchase, read our article How to Finance Buying a Business – Everything You Need to Know
The Wrong Buyer?
Once the new owner had taken over, performance began to dip. Rachel describes logging into the company’s email inbox a few months in: “I could see unanswered complaints, from a business that never had any issues before…it was horrible, absolutely horrible. Everything [the new owner] did was not what she said she would do, and it was against the contract.”
The buyer came from a marketing background, with little experience in sales or customer service – essential skills for running an events business. Shortly after the purchase she installed her son in a management position, but Rachel says: “he was an introvert managing lots of front of house enquiries, which might not have been the best fit. He set up his office right at the back of the building, instead of at the front where you can greet your clients.”
If you’re thinking about buying a business, there’s an important lesson to be learned here: find one that compliments your interests and your skillset. Success as a new owner requires a big investment of time and energy, which will be a whole lot easier if you’re able to enjoy the work. The same applies to sellers - take the time to get to know your buyer, and make sure they understand exactly what they’re letting themselves in for.
SportySkirts.net - Kate’s Party Rentals wasn’t Rachel’s only entrepreneurial venture. The business’ initial success encouraged her to start up something of her own, inspired by her educational background in sports science and sports psychology. SportySkirts.net was intended to provide comfortable, flattering sportswear for women, with “details that men and big clothing industries don’t often think of.” Rachel designed and tested all the apparel herself, and is still selling this flexible e-commerce business on BusinessesForSale.com. You can visit the listing page here.
Turning Things Around
Rachel was still in frequent communication with her team of five staff, and was hearing plenty of stories about things going wrong at her former business. “The staff were the most important thing for me,” she says. “In the end it wasn't about the money, it wasn't about my reputation, it wasn't about any of that. It was just about making sure those people had food on their plates, that they had income and support.”
Watching her former staff struggle was difficult, especially given all this was happening in South Africa while Rachel was trying to start a new life in the UK. One piece of advice she would give to other entrepreneurs is to be very sceptical of absentee ownership. Buying a business is a hands-on venture – not a quick investment that makes money while you twiddle your thumbs. “The minute you step away from your business, you should expect some hardship,” says Rachel. “When the cat’s away, the mice play.”
Eventually, the terms of the contract were breached to such an extent that Rachel terminated it, and regained control of Kate’s Party Rentals. “I had to spend a whole lot of money buying more equipment, freshening up the business, getting someone really good in front of house to push up sales,” she says.
This investment of energy and money helped turn the business’ fortunes around, and Rachel listed it again on BusinessesForSale.com several years later. This time, she found a buyer who was already in the catering world. “He was a perfect bridge for the business”, says Rachel.
Letting Go of a Family Business
Finally finding a suitable buyer for her mum’s business was a bittersweet moment. Letting go of any business you’ve operated for two decades is difficult, but especially so when there’s a close family tie involved. Reflecting on the sale, Rachel found comfort in a message from her mum which she had received more than twenty years ago.
“My mum had written me a letter. It was hidden, and we only found it after she'd passed,” says Rachel. “In the letter she said that I was to release the business - but I was brought up with it, I remember wrapping plates as my pocket money. So I decided to take it on.
“Now that I’ve sold it, I always go back to that letter, and remember that it’s okay to release the business. It was difficult to cut that cord, because it was the most direct link I had with my mum, the last bit of her I could hold on to and make her proud. But there had to be a separation somewhere in the sale where I said to myself - her spirit is with me, not with the business, and I'm okay to let that go.”