Over the last few months I’ve met several business owners who realise that their business has reached the peak of the revenue generation phase (often called “Cash Cow”). It’s time to sell so they can retire. But it’s not quite that easy; each potential purchaser looks at the company and walks away.
Now the revenue is starting to fall and finding new customers is getting harder and more expensive. So they have decided that they need to invest in their product or service to keep and improve the revenue stream to make the company more saleable. If only they did a bit more advertising, networking, etc. then everything would be back to normal.
However things are never going to return to “normal” (even if they knew what that was) because the reality is that their business has passed through the revenue generation phase and is in the classic “Dog” phase. In other words, no matter what they do with their current product, revenue is going to keep going down. Any investment made will not be recouped but will slowly and surely disappear.
In hindsight (and from outside) it is clear what has happened. In the good times, money was taken out of the business to pay for a house, office, school fees, holidays, etc. and too little was put back in to build the business as an asset in its own right with multiple income streams. Now the owner wants to sell for several million but it is too late.
This has become more of a problem in the last few decades for one simple reason: the Internet has come along and dramatically changed the landscape. For example, if you are a publisher looking to sell more books, can you really work against the tide of overall falling book sales?
So what to do? There are several options which include:
- Sell up now and take the loss.
- Put another few more years in and strategically strengthen the position of the company.
- Identify a new market to enter leveraging the current knowledge and create another Cash Cow to sell.
- Stop. Close the company and empty the bank account!
Depending where you are there may be other options too – give me a call if you’d like to discuss any of them.