Every good race director knows that timing is everything. And yet, along with many other small business owners, many race and event owners haven’t adequately trained for their own exits. In fact, Running USA’s research shows that exit planning is top of mind for race owners, with many sharing that they would like more information about exit planning and ultimately selling.
Of course, starting can be the hardest part. Especially, with so many questions to answer. When is the best time to sell an event business? How are they valued? Who might the buyers be? How long will the process take? And what might that finisher’s medal look like — the purchase price? Here are some ideas and tips to consider:
1. Get a confidential analysis of the value of your business
Whether you’ve got a young event, and hope to run it for decades, or if you’ve had your race for awhile, and are starting to think about what’s next, a business valuation is an essential tool. It will give you that 30,000 foot view of the business, including what it’s worth. With a professional opinion of market value from an experienced broker in hand, you get to decide what’s next: take this info, and continue to improve your event, or go to market.
2. Plug into a network of interested buyers
There are multiple types of buyers actively seeking to purchase event businesses. Individual investors, private equity firms, other race owners, non-profits, etc. But the key is finding them, and entering the marketplace in a way that protects confidentiality, and ensures you get in front of the right people. This is where working with a networked intermediary is incredibly useful. In addition to their connections, it also allows you to focus on your life and business without distraction.
3. Prep for ‘race day’ by having your house in order
Just as you wouldn’t run a half marathon off the couch (have done, don’t recommend), going to market is like race day. Financial records should be in order, tax returns filed (and not on extension), operating procedures documented, sponsorships and permits solidified, and equipment inventoried and serviced. Everything about the business will be scrutinized by a buyer. Preparation is 90% of success.
4. Give yourself plenty of time — and don’t end up in the med tent
Business owners often underestimate the time required. It typically takes 3-9 months to sell a business. So it’s more of a marathon than a 5K. There are many steps to a business sale: following the evaluation, there is the marketing of the business, screening and meeting with buyers, negotiations, and finally, deal facilitation and closing. Each step is highly nuanced, but the goal is the same: get you to the finish line with the highest result possible.
5. Timing the sale for a new owner sprint to the finish
Cash flow is KING in business sales. It is what makes all the hard work on a race worth the effort. It is also what drives a buyer to purchase a business. Running can be a great hobby, owning & operating a race is done for financial renumeration. When the registration fees start rolling in it is like Christmas Day for a race owner, it is also what pays all the accumulated bills. The best time to purchase a race is 3-4 months before the race occurs, so the buyer can learn all the administrative activities necessary to successfully execute the event. It also results in two “Christmas seasons” in less than 18 months. Compare that with someone who buys a race shortly after it is completed, that individual will receive only one Christmas in 18 – 20 months, a far less attractive scenario for investment.
6. Prioritize what you’d most like to get out of the sale — and revisit
Write down a list of the top three things you want to get out of the sale, and rank them in order of importance. For some people, that might be the financial outcome; for others, it might be legacy (such as selling it to a local runner). Later, in the sale process, you can go back to this list as a way to stay focused and centered. Ultimately, the goal is to have you look back on the transaction, five to ten years out, with a strong sense of satisfaction — knowing that you did everything you could to honor and maximize the value of what you’d built. That feeling never gets old!
About the author: Sally Bergesen is a Business Sales Intermediary with Run Broker and IBA. She helps owners of privately-held and family-owned businesses successfully sell their companies. Prior to joining IBA, Sally founded and ran Oiselle for 16 years. After selling the business, she wanted to help other entrepreneurs achieve successful exits. Sally can be reached at firstname.lastname@example.org or (425) 454-3052.