Know-Your-Options

Once an owner has thought through the reasons that he or she wants to sell a business, it may be worth considering alternatives to an outright sale. Perhaps the owner wants to retain some degree of control or current income, in which case, hiring an interim CEO or manager, or transferring part but not all of the business may be an option.

Doing so means cutting into the owner’s income, because he or she will need to pay whoever steps in to take over those responsibilities, but it also allows for at least a tentative exploration of life outside of the business without making an irrevocable decision to leave. And it also leaves open the possibility of a future sale if you have shown that the business can operate without the owner’s day-to-day involvement.

Another less-happy possibility is that there is no realistic prospect for a sale. That might be because there is no ready, willing, and able buyer, or because there is limited value to the business after the owner leaves. For example, a service business with no long term or recurring contracts may not be worth much, even if the owner has spent years developing a list of clients. Or if the current owner represents the “brand” then it may be difficult for a new owner to maintain client relationships that have been built over a long period of time.

In such a case, shutting the doors could be the only option. This may mean a “fire sale” of remaining assets, such as inventory and equipment, but this is not a retirement nest egg in the making.

For owners with more time, it’s possible to increase the marketability of the business by cleaning up the financials, establishing renewable income streams, and diversifying the product or customer base. Above all, it is critical to make the business less dependent on the owner. This might mean developing a new management team or getting other employees involved in customer retention and business development.

Could you sell your business today? If not, it’s time to think about how to make it marketable.