Sooner or later every business owner must address the question, “How will I successfully sell my business and move on with my life?”
Many of the owners I have talked to seem to be ‘marching in place’ acknowledging that they need to plan for their future but are in denial about the need to plan ahead. They seem to believe that the process is simple and the time to ‘make it happen’ will be short. Actually, that’s not the case for most of them.
Every Business Owner needs to develop a transition strategy with plenty of time to execute it 'on their time table' to withdraw their equity, assure the continued success of their business and, prepare, personally, for the 'next phase' of their life.
The transition strategy must address three key areas of concern:
They often have addressed the financial aspect but not the other two.
Here are five key questions for the Business Owner to answer that become the building blocks of each Transition Strategy:
1) How will I harvest my investment?
2) Who will purchase my business?
Will I sell to an external buyer?
Will I sell internally - to my family, partners, key staff?
3) What is the legacy I want to leave?
4) What do I want to do in the next phase of my life?
5) What is my timetable?
Developing and implementing a Transition Strategy can be a long term process that begins with working out the answer to these questions, planning the strategy and identifying the action steps to 'make it all happen.'
All these questions are inter-related. For instance, the owner must decide who the prospective buyers might be. If it will be internal buyers, the seller must determine that the buyers are prepared well in advance. The buyers must have passion, the ability to manage the business and the money to buy the business on the owner’s terms.
Several owners I've worked with expected to sell to their partners or staff only to discover that there wasn't enough time or the potential buyers didn't have the resources.
I have also worked with several owners who think they are ready to sell the business but 'get cold feet' because they aren't prepared, emotionally, to move on with their lives. They haven't chosen a next phase of their lives after they make the transition. Making the decisions feels like a dead end or like falling off a cliff. So they hold on too long and their equity diminishes.
For the transition to be successful, the owner must addresses the five questions and develop a comprehensive Transition Strategy well in advance.
My work focuses on these five questions. I begin working with the business owner, helping her or him explore their aspirations and cataloguing the key issues they need to address to plan their transition, Working with the owner, and sometimes their key professional advisors, I help the owner identify he or/his desired results and develop a transition strategy to achieve those results.
In future articles, I’ll discuss various elements of the planning process.