Someday, you will transition your business. But who should carry on your legacy?
Let’s explore 5.5 ways to transition your business and maximize your value:
1. Strategic Buyers
A strategic buyer does not directly compete with your business or your service offerings. Generally they are either out of your market geographically or they don’t offer the same type of products and services as your business.
Strategic buyers are motivated to buy your business to gain access to your customers to cross sell their products or services and to offer your products and services to their customers.
Over time, strategic buyers will look to consolidate support functions such as human resources and accounting, but often retain sales and operations staff.
A competitive buyer competes directly with you in your market. They may be motivated to either remove your product and service offerings from the market or continue to appear to compete with your brand. They win either way.
Although they may retain your best people, they will often quickly eliminate redundant operations and staff.
If one of your transition objectives is to retain your commercial real estate and lease it to the new owners, your competitors may or may not be the ideal buyers. Of course they could transition their operations to your facilities too!
3. Financial Buyer
Financial buyers are looking at your business as an investment and evaluating the potential returns through growth and cost reductions that lead to improved profitability and returns.
Their primary motivation is TIME. As they look to purchase your business, they are already planning when they will sell it – in 3 to 5 to 7 years in order to generate the maximum returns for their investors.
A financial buyer offers tremendous value to a business owner looking for liquidity and success in transitioning their business. They can also introduce a great deal of complication to the business if you are continuing in a consulting capacity or ongoing business management.
4. Key Employee(s)
Transitioning your business to a key employee or employees can be one of the most effective methods of continuing your business while you step away to the next phase of your life.
The challenge with key employee transitions is securing enough capital from the employees to achieve your personal goals. These transactions require experienced advisors to ensure the continued success of the business and maximization of your value.
Transitioning your business to a family member can be the most fulfilling achievement of your business life. It can also lead to the destruction of family relationships.
It doesn’t matter if you are transitioning to a sibling or to your son or daughter, engage a third party advisor to structure the transition and negotiate the terms. Do not do this alone!
.5 No Transition Plan
This is the “no plan” approach to transitioning your business.
Far too many businesses transition due to the untimely death or disability of the business owner or due to some other crisis that forces a fire sale.
The spouse or other family members are left to take what they can get if they can sell it or simply to close the doors with no rewards for decades of hard work.
What’s the remedy?
Create your Business Estate Plan now.
Determine the right potential buyers for your business and
Maximize your value.
It’s a great gift for you and your business and perhaps the greatest gift you can give to your spouse and family.
Founder & Chief Executive Officer
Alex has advised hundreds of small businesses on strategic planning, business development and all areas of corporate finance, specializing in helping business owners sell their business or raise capital for growth and acquisition. In his work with business owners, he has found many have done very little planning for an eventual transition away from the day to day operations or out of the business altogether.
As a native Arizonan, his passion is working with and advising local companies and helping business owners gain comfort in their eventual retirement and have the knowledge that when the time comes to sell the business they have a well designed plan of action already in hand, a good idea of what that business is worth, and who the next owner will be. He founded Arizona Business Transitions to assist business owners plan for an exit or transition, even if that transition is not on the horizon.
Alex attended Brophy College Preparatory and graduated from DePauw University – Economics and Management. Member of the Tempe Diablos Charities. He lives in Tempe with his wife Trish and two boys, 10 year old Carter and 7 year old Aidan.