To make that process easier and more lucrative, you need a proper plan in place.
It’s important to plan ahead when selling your business, as you’ll have the advantage of time.
You’ll have time to build transferable systems that will command a high price, and time to find the right buyer – family or otherwise – to take over the helm.
Deciding to sell to family or strangers
Which of these scenarios will best suit your future plans for yourself and for your business?
There will come a day when you’ll pass your business to a buyer. To make that process easier and more lucrative, you need a proper plan in place.
Why would any entrepreneur want to give this up? Some business owners rightfully want to enjoy some retirement fun. Others feel their legacy is best handled by a younger generation equipped with the skills necessary for the times ahead. And, some entrepreneurs want to stop working on one business so they can start working on another!
You may want to sell your business to a company you don’t know, or you may plan to pass control to a family member. There are many options available to transition ownership of your business.
Here are some options to consider.
Sell to a family member
Transitioning a business from one generation to another can have an emotional and psychological impact on the family and your employees.
If you plan to transition to a family member, ask yourself the following:
- Who in your family has the drive, aptitude, skills, interest, and commitment?
- Will one person or multiple family members take over the business?
- Will I ask for an upfront price or receive payments?
- Who will be disappointed by the transition plan?
- How and when will the transition take place?
- What do I need to do to release my day-to-day responsibilities?
Be transparent but firm with family
Open communication is the key to the successful transition of a business within a family. It can save a lot of emotional upheaval down the track.
Make sure your family knows and understands exactly what you’re planning. Consider using the expert services of a skilled facilitator to aid the process, such as a succession planning expert.
Sell to a partner
You can choose this option if you already have a partner, or you can find a partner specifically for this purpose.
Work with your accountant and lawyer to map out the process and to create an appropriate partnership agreement (if you don’t already have one).
Put the business up for sale
Whether you plan to sell now or later (and you’re not selling to a partner or family member), it’s wise to find representation.
There are basically two options: a broker or a mergers and acquisitions (M&A) firm. While there are no hard and fast rules, if your annual business revenue is less than $3 million, you will likely be best served by a broker. If your business is larger, an M&A firm may be more successful for you.
Advisors are key
Ask your advisors for their suggestions and do some research to identify the best type of representation for your particular business. A broker or an M&A firm will guide you through the (often perilous) buy-sell process to ensure the purchase amount and conditions satisfy your objectives.
Receive an unexpected offer
You may decide to defer any decision to sell your business and one day be surprised by an unsolicited offer to buy. It could be a competitor seeking to acquire your business for strategic gain, or an investor attracted to your profits.
When a prospective buyer approaches you, stay cool. Learn what you can about the deal they have in mind but don’t say anything. Contact your advisors immediately.
Whoever takes over your business, start to make your plans now. Have a talk with your family to find out if they are truly interested in continuing your business. Family members in particular have a right to know your intentions. Plus, the chance to name and groom a successor will make the transition easier for all involved.
If someone or some company outside your family circle is your choice to continue your business legacy, work with your team of advisors and representatives to secure the sale results you deserve.
Whatever your preference, to get the most value for your business and to ensure a smooth transition it’s important that you plan the process carefully – and soon.
Before you take action on any of the information above, we recommend consulting with a qualified business advisor that understands your unique needs and situation for your specific business and/or personal plans.