Contemplating selling your business?

Keys to a successful exit

By Charlie Gray   |   October 5, 2009

Are you considering selling your business? Start by asking this question:

Why do I want to sell my business?

Why is this question so important? To achieve clarity of purpose. Knowing exactly what you want and need from selling your business may define the structure of the sale.

For most business owners, their single largest financial asset is that business. The owners’ connections to the business are both financial and emotional. Yet most transactional business brokers or investment bankers get paid from the proceeds of the sale. And their desire to complete the transaction sometimes interferes with the interests of the business owner.

There is an assumption by such brokers that all business owners want to sell their business for the maximum amount of money.  Yet YOU may prefer to sell your business to your key employee for less money because you know she will continue your vision for the business. Or perhaps you would like to keep a limited involvement in the business so you can continue to enjoy some revenue or provide the benefit of your wisdom to the continued success of the company.

Next question:

When do I want to sell my business?

Sometimes the right answer is not to sell right now. Instead, take steps to increase the value of your business first. Get your books in order – that’s a good place to start. Then there are intangibles to consider. Most often there are hidden strengths and values within your company that haven’t been fully monetized. For example: over the years, you may have rejected revenue opportunities that didn’t fit with your vision. However, once you begin to consider selling your business, it may be a good time to re-consider such decisions. Perhaps you can add strategic partnerships and sales channels or perhaps a personnel repositioning that is more in alignment with current industry practices.  A skilled management consultant may be able to identify opportunities for improvement that won’t require substantial resources.

“Getting your team together”: As you position your business for a potential sale, there are obvious participants that will ensure a smooth business transaction – your legal and accounting teams, your investment banker and trusted financial advisor.  However, one should also consider other members as part of their team.  Depending on whether you will continue to play a role in the firms’ activities after the sale, you may want to position the right people such that it will maximize your benefits of the sale and allow you participation in the firm’s activities without the hassles of everyday running of a company? You may have far less influence in such positioning after the sale is completed. By thinking ahead, you may even negotiate terms of the sale such that key members of your “post-sale” team retain their responsibilities for a fixed time into the future.

When the focus is on the value of the transaction or the sale alone, in my 18 years of experience as a financial advisor, I have noticed that  it is very typical for many business owners to feel bad after the transaction is over. Sometimes it’s a feeling that they could have done a better job; not just monetarily but success in other aspect as well. By thinking and planning ahead of time, the transaction could instead become a very rewarding experience.

Charlie Gray

About the Author

VP & Senior Financial Advisor Charlie Gray, CFP®, is a founding member and partner at JOYN. He has 30 years of financial planning and investment experience working with successful business & community leaders and their families. He also serves on the firm’s Investment Committee.

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