My neighbor asked me, "Why would anyone sell a
successful company?". He could not understand why anyone would leave a
business that was doing well. Of course successful companies get sold
all the time.
So why do these business owners sell? The short
answer is that most closely held businesses sell for human reasons,
such as burn out, retirement, illness, partnership disputes, family
issues or other personal reasons. Usually the business is fine but the
human being running the business needs a change. To understand this
better it is key to understand the other options for exiting a business.
Close the Business/Liquidation
Closing a business that is profitable never makes
sense. Even if the assets are liquidated the price is likely to be
pennies on the dollar versus selling the business as a going concern
with employees, customers and a reputation that is intact. Not only
does the business owner get the lowest value but the employees, vendors
and customers are hurt by this type of exit.
Accident, Illness or Death
No one wants to exit their business this way, but
many do. The loss of an owner not only creates tremendous issues for
the family but also creates a leadership void in the business. Even the
most competent management can struggle when a key business leader is
lost to a serious accident, illness or death. No one plans for this
type of exit but many end up exiting the business this way because they
failed to create an alternate plan.
Succession
Succession by a family member or key employee has
its benefits. They know the business, its product or service,
employees, customers and vendors. Succession can be operationally
successful for the exiting owner if they make sure the successor is
carefully selected, qualified and groomed for the position. The owner
must be careful not to make an emotional choice of a relative or
favorite employee but instead choose the successor with the right
skills to lead the company into the future. You are not seeking an
"Employee" mentality but an "Owner" mentality. If that rare person can
be found in the business who can make the transition to Owner, they
often do not have the cash needed to purchase the business. They are
also likely to want to pay less for the business as familiarity will
blind them to many of the value drivers of the company. So although
succession can be operationally successful it is rarely a financial
success for the outgoing owner.
Sell
Closing or liquidating the business minimizes the
value to the owner. Accident, illness or death forces the issue on the
owner. Succession provided a very limited pool of options with limited
financial reward.
Selling on the other hand allows the business
owner to decide their ideal timing, maximize the value of the business
they worked so hard to build, coordinate the use of the sale proceeds
for financial planning and align their personal goals with the sale of
a business. Selling the business allows the business owner to create a
wealth event and often significant on-going passive income without
having to run their business.
Whatever they are, human reasons are always
pushing and pulling on a business owner. Burn out, stress, divorce,
illness, partner disputes and limited growth capital are some of the
human reasons that push owners out of the business. Retirement,
enjoying life, relocating, a new business opportunity and passive
income are some of the reasons that pull a business owner out. Whatever
the motivation, the fundamental reason a business owner chooses a sale
as their ideal exit plan is control. The business owner chooses to
understand the value of their business and to proactively pursue the
right buyer and the right price. By selling a business you choose to
exit your business by choice, not by force.
The professional team at Sunbelt Midwest can help
you confidentially sell or buy a business in Minneapolis, Milwaukee,
Chicago, and surrounding areas. For more information check out our site
at http://www.sunbeltmidwest.com.
Article Source: http://www.articlesbase.com/business-opportunities-articles
/is-selling-your-business-the-best-exit-plan-871645.html
About the Author
The professional team at Sunbelt Midwest can help
you confidentially sell or buy a business in Minneapolis, Milwaukee,
Chicago, and surrounding areas. For more information check out our site
at http://www.sunbeltmidwest.com
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