As a teenager, Jonathan Sherrill started working for his dad in the steel metal roofing manufacturing industry and ended up helping his dad sell Gulf Coast Supply & Manufacturing in 2010 to a private equity group, then ran it for them for six years.
He told attendees at the Atlanta Smart Business Dealmakers Conference that when he was hired by the private equity company to run the business that he had grown up in, he quickly realized that there's a whole different way of looking at business from an investor standpoint. The business went through some major changes early on to get the kind of reporting the PE group needed, as well as the weekly and monthly calls, and board meetings that he wasn't used to.
"It was baptism by fire," Sherrill says. "But I was driven to learn all that I could from it and learn how an investor thinks and what they're looking for. And the transitions that we had to go from that mom-and-pop-type business to a real investment worthy business, some of those were pretty painful transitions."
So, when he left that business in 2017 to start his own, he says from day one he knew he wanted at some point down the road to sell it. So, he wanted to build a foundation that enabled the business to run with enough visibility into the finances and the reporting that at any point in time in the future that they decided to sell that they already have those things in place because of how critical that is to any investor, whether private equity or strategic.
The company spent a lot of money as a startup company to do just that. They bought an ERP system and hiring someone capable of implementing it and running the finances. While those were big upfront expenses, he says they paid off big time, giving him great visibility from day one into exactly where they always stood on all segments of the business, finance wise.
And when they decided to sell, he says he hired a coach a couple of months prior, who he says was vital to the success of the sale. For example, even though they had great reporting, they needed a quality of earnings. The coach recommended a company, and they went through a complete analysis.
When he put the business up for sale with the help of an investment banker, he thought the process would take three to six months.
"Wishful thinking," he says. "My wife thought the same thing. And, my mom and dad had put some money into the business, she was like, 'Surely they can get it done in three months.' That's no problem, because my dad's business sold in three months. Well, this was a whole different animal. It was about three times the size of that business, and just a different time."
Something else that became clear through the process is that it's expensive to sell a business.
"If you know you're going to sell your business, then spend the money," Sherrill says. "You won't regret it. Hands down, you have to hire the experts because, frankly, you're just not an expert in those areas. You might be strong on the financial side, but you're not on the other sides."
He says by waiting and trusting the wisdom and experience of his investment banker, he ended up sell the business for double what he thought it would get.
He says it's important for sellers to be prepared, in part because potential buyers see that preparedness and are more at ease.
"If you act like it's a surprise to you and act like their request is dumb, they're going to dig deeper," he says.
