After youve made the decision to sell your company, its time to decide which approach will best satisfying your desires and financial requirements.
Deciding to sell your business is a big decision, but once youve realized youre ready to move on the next step is to choose the sales path that best meets your needs. Some owners want to sell as quickly as possible, others want to receive the highest sales price regardless of timeframe, and still others may wish to remain involved with the business post-sale. Factors such as these combine to form your sales objectives and, before going any further, it is critical that you define these clearly. A broker who has been around the block with a number of other entrepreneurs can help you do this.
If you have a business partner, a very common sales path is selling your stake to your partner. Most business partnerships begin with a legal agreement outlining the process for selling a partnership stake to the remaining partner(s). When this document exists, the details of the process (often including the price) are already established and the transition should be fairly smooth. One of the key benefits of this sales approach is that, often, pre-defined partner exit strategies result in the least disruption to the business, clients and employees.
Selling to a family member is the exit strategy of choice for about a third of all small business owners. These owners have usually been thinking about the transition for some time, so its likely they have already discussed their exit plans with attorneys, accountants and their family successor(s).
This option is great when a trusted employee has both the desire and financial capacity to buy and run the business. It typically begins with the creation of a partnership and buy-sell agreement.
Individuals buy businesses to become an entrepreneur while avoiding the risk of starting a company from scratch. Additionally, thanks to seller financing (which is usually a necessary component of these deals) it is easier for new owners to finance a purchase than it is for them to finance a start-up through investment or commercial financing.
If you are in a hotly competitive space, being acquired--in full or part--by a competitor may be an option. These types of acquisitions usually occur for strategic reasons rather than purely financial. If the acquirer stands to achieve a substantial competitive advantage from your products or services or through expanded market reach, this sales path offers the possibility of a strong selling price.
A sale to employees involves a tax-qualified, defined employee benefit plan called an Employee Stock Ownership Plan (ESOP). In this sale method, employees of the business buy shares either immediately upon your exit or over a period of time, depending on how the transition is structured.
Liquidating your business is an option of last resort and is most common for small businesses with significant weaknesses or solvency issues requiring an immediate business exit. In cases such as this, liquidation may be the easiest and fastest way to recover some value while avoiding investing additional funds before leaving the business in your rear view mirror.
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