“My house is always for sale.” That’s what a mentor of our CRO used to say. It’s about always being on the lookout for someone who might buy the house someday, or planning for when the day comes.
You may not have started your business with a view to selling it, but it’s a good idea for business owners to plan for when they’d like to step down or hand the reins over to someone else. That plan can help the transition to go smoothly as well as make sure you get the highest possible returns.
Many business owners actually have a plan in place for selling the business even before they begin operations. That’s because the plan affects decision-making throughout the business’ lifecycle—“adding to the value of the house”, as it were.
In coming up with that plan, you’ll want to think about how long you’re going to run the business, and how much in revenue you plan on generating during that time period. You’ll also have to take your partners or anyone who’s invested into your business into consideration, as well as how big your business is, and the industry you belong to.
- Sell to partners or managers. Note that high interest rates and upfront capital needed may deter them from buying out the business, so selling down over a vesting period might be an option, where you still retain part control and ownership.
- Sell to an investor. This might be to your network, one of your employees or relatives. Bear in mind that investors may want you to stay in the business until they can find a suitable replacement, so this is where there could be a longer exit period required.
- Sell to another business. Mergers and acquisitions are among the most popular ways of selling a business because of how it can generate cash, quickly.
- Sell to someone who wants your team. Business owners who are particularly concerned for the welfare of their employees might choose to sell to a company looking to expand its talent base. They can rest assured knowing their team will be cared for after the business is sold.
- Sell the business on the market via an IPO. Going public is another popular, high-profile and highly profitable way to sell your business, but note that this may not be the best way during an economic downturn and requires a lot of initial paperwork, money and time to float.
- Sell the business’ assets and liquidate. This involves shutting the business down altogether and dividing the proceeds of the sale of your business’ assets between you and your stakeholders. You can do this right away, or over an extended period, during which time you “withdraw” your funds from the business until there’s nothing left.
As a final option that doesn’t involve selling your business when the time comes, you might consider simply handing the business over to loved ones such as your children.
Whether you choose to hand over or sell using one of the options above, it’s also a good idea to have accountants and legal advisors on hand. You’re likewise going to need a thorough examination of your financial records to help you valuate your business. If you’d appreciate some assistance with your plans for the sale, book a discovery call with us, today.