Joe Coulombe—the “Joe” in Trader Joe’s—had built his business to include 20 stores on the West Coast when he sold it to German retailing magnate Theo Albrecht in 1979. Coulombe was just 49 when he decided it was time to sell.
Under the Albrecht family’s ownership, Trader Joe’s has grown to 344 stores, which will generate a total of approximately $8 billion in sales this year.
One way to look at Coulombe’s decision to sell when he reached 20 stores is that he sold too early and should have put in another 15 years to take advantage of the market opportunity that the Albrechts ultimately profited from. He left a lot of money on the table, you might say.
Economists would argue that you should sell your business when it reaches the point of diminishing returns; others would say you should sell only when you can make “your number”; and still others think retirement age should be the trigger.
I’d like to present an alternative view: perhaps the right time to sell your business is when you have made it as good—not necessarily as big—as it can be.
Abraham Maslow argued that humans are motivated by a series of needs. Once one need is met, we seek a higher level. I think his model can be applied to thinking through when to sell your business.
As your business grows, you meet what Maslow refers to as your “Physiological, Safety, Love/Belonging” needs through the financial security and camaraderie of running a successful business.
As your business gains increasing recognition in your industry or your town, you reach Maslow’s fourth level, which he called “Esteem.”
The last and most elusive level, called “Self-Actualization,” can be loosely translated into becoming the best you can be or realizing your full potential.
Which brings me back to Joe Coulombe. My guess is that he sold Trader Joe’s when he sensed he had made it as good as he could. Not as big, not as valuable and not pegged to an artificial day on a calendar. Just as good as he could personally make it.
When do you think will be the right time to sell your business? Are you focused on a number, date or some other milestone on the horizon?
A couple of other tid bits:
1. Should you focus on top or bottom line growth in your business? If you concentrate on growing your top line at the expense of your profit margin, you may turn off some possible buyers. Here’s an article I wrote this week on the topic.
2. Are you going to The Fortune Magazine Growth Summit? I’ll be giving a talk on building to sell so please stop by and say hi.