Succession & Selling
There are four possible transition methods:
- Closing the doors
- Selling to an outside buyer
- Selling to family members
- Selling to employees
With each buyer there are common transition items to monitor;
- Setting Realistic expectations. Eliminating a preconceived sales price is essential. An owner needs to understand the market conditions and current demand for the business in the timeframe they are looking to sell.
- Displaying Financial purity. Financial statements help sell. Owner related expenses dilute profit margins,which may attract fewer buyers and can create the opportunity to negotiate price. Keep the need to recast at a minimum.
- Emotionally Seperating. When it comes time to sell owners need to have put themselves in the position of being replaceable. Buyers will discount an offer if they think no one but the owner can keep business running.
Additional unique issues to consider when selling to:
- Outsiders. These are pure financial transactions with the goal of optimizing the net proceeds from the sale. Making the business appear operational without the owner’s involvement helps stimulate better offers.
- Family Members. The owner may find it difficult to step away from managing even after the sale. It is important to transfer of the decision making role otherwise employees, vendors and clients will not understand who is in control, which can affect operations.
- Employees. Although the buyers are not family members, the employees are often like family with social and interpersonal relationships with the owners. Unless the owners are physically relocating there may be post-transition interaction with the new employee owners.