There are any number of reasons a business owner doesn’t want to sell their business on the open market. It could be:
- Our staff are like family and we want to make sure they are looked after.
- We spent years building the business and don’t want it to be run by strangers.
- In the current economic climate the pool of potential buyers is not large.
- Friends have sold and the price they got was not what they hoped for.
Whatever the reason, not wanting to sell on the open market does not mean you can’t exit the business. We are seeing a growing number of businesses turning to transition options.
Transition involves selling down your equity in the business over time, but it could be to:
- Family members,
- Key staff, or
- Other appropriate parties.
The advantages of this approach can include:
- You get to control the process
- You get to control the timeframe
- Effectively managing the way the family business stays in the family
- Effectively retaining the services of key staff members
- It may be the best way to maximise your return
- Enabling the future owners to secure their funding using the business assets
Whatever the reason and whoever you are transitioning to, it is critical that the transition process is well managed. A problem with the sale of your car or boat can usually be rectified, however a poor sale process for a business can have very damaging effects on you and the business.
Some of the key features of an effective transition process include:
- Ensuring everyone involved understands the process
- Ensuring everyone is on the same page in terms of what is trying to be achieved
- Developing an agreed business transition strategy
- Documenting the plan
- Formalising the arrangement in writing
- Seller and buyer working together as a team through transition
The potential benefits are great to all parties on a successful transition. The risk of poor outcomes is greatly minimised if you follow the concepts outlined above.
If you would like help exploring or planning for your transition options, please contact John or David on 07 3221 4465.