Prepare Now To Sell Your Business Later
When so much is written about starting a business it is easy to overlook the fact that running a business isn’t always what we set out to do. Circumstances can conspire to put us in this position ‘just because’. Just because we married someone who had or started a business, or we got roped into the family business.
For a family business there are quite a few matters that need to be considered as children grow up and are looking for work. Will they work for the family business, or do they want to do something else. If they do work for the family business – are they suited? Are they willing to learn or are they just kept around because they are unemployable anywhere else?
All touchy subjects so perhaps that’s why we tend to avoid them.
Selling The Business In The Future
Is the business one with a potential to sell, at some time in the future or is it only a going concern for the current owner? The answer to this can be no more than the form of the current business model. Some businesses are less ‘a business’ than they are a situation of self employment. If this is the case, sometimes it is possible to convert it into a model with some potential for sale in the future. Elements that can make the difference might be formalizing contracts for work with regular customers, introduction of systematic processes for repeating work, creating a marketing mechanism to generate reliable leads and maintenance services to offer customers.
Each business has a different scope for creating this potential, but there are few that do not have some capacity to build this into the way they operate the business. This ‘end sale’ can be significant for the business owner when they want to leave the business finally.
Passing The Business On To Children
If adult children are involved in the business, then their level of inclusion and value to the business may vary from child to child. Will they all get an equal share or are only some of them active and productive in the business? Will one child be given the business and buy the business and in that case what strain does this put on the relationships with the family? If the child is to buy the business, and they are currently working in the business, where will they get the money to pay the retiring parent?
The parent retiring will need money – and the child buying may not be in a financial position to have the money to pay them. This can be a bit of a minefield and have need to be really well facilitated in these discussions to find a workable outcome that is beneficial as possible for all parties, without putting other children offside.
Passing The Business Down
If the business is going to pass to the children at some time in the future, then what has to happen to ensure the skills of the child who takes over are developed? What training outside the business and within the business do they need to undertake? What career path do you need to consider for them and what milestones that will see you hand over more responsibility for management, as that time for handover approaches?
Attractive To Buyers
Just because a business is for sale doesn’t mean it is going to be attractive to buyers. Some business are stuck ‘for sale’ for a long time with no takers. This could be because of the location and low population and business activity, or it may be that the asking price is not realistic, or the business is in an industry with a sketchy or limited future.
If you are intending to sell your business, it makes sense to run it as though it was for sale now – at the best price you might reasonably be able to achieve. That might mean tidying up the way that the business operates, getting better organized, improving your ability to market the business products through better database management and marketing, improving product presentation, service range and financial management of the business with good record keeping.
What’s It Worth?
If you think your business has potential to be worth more than it is worth right now before you do anything to prepare it – then it makes sense to own the business you’d want to sell. Now.
The price you can realize on the sale of the business needs to have some practical evidence to support that price. Just wanting a million dollars for your business doesn’t make it worth that to someone to pay you. When you present your business for sale you should have the details to support the pricing and a convincing story to go with the price tag. This will be your big sale and the final one you make, so you must have a good show to get that interest, and inspire confidence in those who want to buy it from you.
Letting go, can be a struggle for some people. You’ve worked hard for years and maybe forgotten what else there is to life besides going to work every day. Working hard is good but at some point we need to be able to let go and allow others to take up a more important role in making decisions for the business. The founder that stays too long and beyond their time of best decisions is not helping the business at all. Leaving too soon, or before the successors are well able to manage without you may not be good for the business either. Balancing the needs of the individuals in the business, and the needs of the business itself can be delicate so a plan for this can help this transition phase.
How is the industry changing?
We are in a state of major structural change in the marketplace. Some businesses will not continue into future decades. Other businesses will adapt to the changes and in future may be operating in a different segment of the market than the one they began with. The future of your business may be affected in this changing business environment. Understanding trends and being flexible to adapt – or observant enough to get out while you can is often a timing issue that makes a great deal of difference to the successful separation from a business. Don’t be ‘the last video store in town’.
- Make a list.
- Write down all the issues that have come to you about your business as you have been reading this article.
- Number them in order of priority or importance for your circumstance
- Once you have identified the issues that concern you most, get some help to work through the issues. You will have ideas of your own, but someone with ‘fresh eyes’ and experience away from your business can be very valuable to you in opening options you have not considered, and perhaps closing others that are not really viable.
- Commit to making some decisions around this now. Not waiting till a crisis forces it and it is too late.
This will be your ‘last paycheck’ from the business. Make it a good one!