Deciding to keep your business in the family or to sell up

Planningforthesuccessionofabusinessisanimportantandsometimesoverlookedpartofabusinessplan.It’saninevitableperiodinthelifetimeofallsuccessfulbusinesses–soit’sbesttoweighuptheoptionsearly.

Keeping your business in the family

Themostobviousprogressionistokeepyourbusinessinyourfamily.Thisoptionshouldinvolvecarefulplanningasthereareseveralissuestoconsider,including:

Selling to management or employees

Choosingtosellyourbusinesstoyourmanagementteamoryouremployeescanbeapositiveforallparties–they’llbecontinuityforyourbusiness,andtheloyaltyandhardworkofyourstaffwillberewarded.

The crucial question is: Are any of your staff members interested in taking over your business?

Yourbusinesslegacywilllikelybeingoodhandsifyouhavededicatedstaffwhobelieveinthebrandandthebusiness,butthereareotherconsiderationssuchas:

• Finding out who’s most interested in continuing your business over the long-term.
• Whether your staff can find sufficient capital to buy you out.

Being bought out by your business partner

Yourbusinesspartnermightbethelogicalchoicetoacquireyourshareofthebusiness.However,therearebothpositivesandnegativesforsellingyourbusinesstoyourpartner.

On the downside, your business partner will have a strong bargaining position perhaps not agreeing with your preferred selling price.

Onthepositiveside,yourbusinesspartnerhasanongoinginterestinseeingthebusinesscontinueandprosper.

Offering your business to investors

Ifyou’regoingtosellyourbusinesstoinvestorsorothercompanies,yourindustrywilldictatethenumberofpotentialbuyers.Itmightbeachallengefindingawillinginvestortopaywhatyouwantandwithinyourpreferredtimeline.

There are often two types of investors, namely:

• A strategic buyer – who wants your share of the market. These buyers may see your business as a natural extension of their own.
• A financial buyer – who simply wants to make your profits, assets, and the value of your business their own.

Franchising

There are some businesses that naturally work as franchises – where the original business is replicated multiple times but with different owners and royalties paid to the original owner.

Franchising your business involves plenty of forward thinking – you’ll need time to determine whether your business would work as a franchise, to get a few franchises up and running with the right training manuals and standardized products or services.

Following expansion, you may find yourself in a position to sell your original branch and to live off the royalties into retirement.