Selling a business you have poured your heart, soul, money and reputation into can be stressful to say the least. However as nerve wracking as it may be making these decisions, there are always measures you can put in place to lessen the stress and hopefully achieve the desired outcome. As in any successful endeavour planning ahead is the key.
MaryAnne Edwards
We all know the optimum time to sell a business is when it is doing well but this is not always the case and many owners wait too long to begin the sales process. Consultants who specialise in selling businesses often advise business sellers to start the process from 1-3 years ahead of the time they wish to make an exit.
Putting a price on your business is never easy and the customer loyalty and brand you have built up over the years and the reputation often lies with the owner and given this person is leaving the business upon the sale, perspective owners often do not compensate for this value to the degree many owners feel is necessary. Often the real value of the business is in the knowledge of the owner and employees.
There are many factors to consider when deciding whether or not to sell, and it’s important to weigh the pros and cons before making a final decision.
Documentation is critical if you decide to pursue a sale process. GMBA have developed a checklist as a guide to what needs to be prepared for a sales process. Remember preparation is 90% of success. A business valuation is essential. This highlights 2 things, first is whether your exit strategy is achievable and second it reveals how the business is valued and possibly identifies measures you can take to get the best possible price. Often advisors might suggest making the business less reliant on the owner (if the owner is not going to be involved post sale) and putting a team in place who can guide the post-sale process. Often the owner will offer to stay on for a period to train and help in the transition.
The pros and cons of selling a business:
Pros:
1. Financial gain: One of the biggest benefits of selling a business is the potential for a significant financial gain. Selling a business can provide you with a lump sum of money that can help you achieve your financial goals, invest in other opportunities or pay off debt.
2. Retirement: Selling a business can also provide business owners with the opportunity to retire and enjoy the fruits of their labour. It can be a great way to transition into retirement and start a new chapter in life. Often family members are not interested in taking over the business and it becomes not just a decision re selling but an emotional decision re giving up a business held by the family for many years.
3. Reduced risk: Selling a business can also help reduce the financial risks associated with owning a business. By selling, you can eliminate the uncertainty and potential losses that come with running a business. If you have not invested in upgrading systems, processes, equipment and R&D your productivity and appeal as a supplier can often be reduced and no doubt you see revenue/sales declining. At what point do you sell or close down.
4. Opportunity to start fresh: Selling a business can also provide business owners with the opportunity to start fresh and pursue new interests or ventures. It can be a chance to explore new opportunities and challenges. Sometimes the business does not fulfil your ambitions or lifestyle and selling provides an opportunity to look at other possibilities.
Cons:
1. Emotional attachment: One of the biggest cons of selling a business is the emotional attachment that business owners may have to their business. Selling a business can be a difficult decision emotionally, especially if the business has been a big part of your life for many years.
2. Loss of control: Selling a business means giving up control over the day-to-day operations and decision-making process. This can be difficult for business owners who are used to being in charge and making all the decisions.
3. Uncertainty: Selling a business can also bring about a sense of uncertainty about the future. Business owners may worry about what will happen to their employees, customers, and the legacy of their business once it is sold.
4. Tax implications: Selling a business can also have tax implications that need to be considered. Depending on the structure of the sale, business owners may face significant tax liabilities that can impact their financial gain.
In conclusion, selling a business is a major decision that requires careful consideration of the pros and cons. It’s important for business owners to weigh the financial benefits against the emotional and practical challenges of selling a business before making a final decision. Ultimately, the decision to sell a business should be based on what is best for the business owner and their long-term goals.
by MaryAnne Edwards, GMBA Australia and New Zealand
Click here to view the GMBA checklist
