Your options when selling a businessThere are a variety of options to consider when the time comes to sell a business. After all, you want the best possible return and outcome for your business to hopefully maximise the investment you have made over the years.
1. Sale to a private buyer
Most businesses end up being sold to outside buyers. If you are planning on selling a business privately you need to ensure the buyer is genuine and committed to going through with the purchase. Be aware that competitors disguised as 'buyers' might use the opportunity to scout your business, gathering valuable knowledge on your client base and specific business systems. Once you have ascertained the prospective buyer is genuine, not just a competitor checking you out, you need to reassure yourself the buyer has the appropriate business skills and experience necessary to make the move. If the buyer is transitioning from a regular job with a guaranteed salary to being self-employed you need to know they have the necessary courage and tenacity to make this transition. Many of today’s sales now involve the seller leaving money in the business (vendor financing) so you may have a vested interest that the business will survive and prosper under the new ownership. The majority of businesses end up being sold to outside buyers by going to the market - be it through online media like aubizbuysell.com.au, newspapers or word of mouth.
2. Sale to another company or corporate
If you sell your business to another company (maybe a competitor or a similar business), you may be fortunate enough to get your price and be able to walk away without any further financial ties to the business. While this option can give you your best price, it also requires the most work on your part and is likely to involve a very thorough 'due diligence' process before the sale goes through. If it's a corporate buyer then they may want the owner to stay on, on a contract basis to embed the business. This type of sale also often requires the owner to sign a 'restraint of trade' agreement.
3. Management buyout
There are a number of advantages in selling your business to a partner, manager or to your employees. After all, your employees know your business, which is likely to make the transition easier and quicker, and it is unlikely you will be required to prepare the same level of documentation that an external buyer may require. A management buyout is more likely to result in stability for the existing staff and business and it is unlikely you will be required to stay on for a transitional period, leaving you free to move on with your life quickly. It can also avoid a loss of value in the buyers eye’s should the business lose some key staff in the business sale process. Thirdly, you are not as likely to be required for a transitional period of 'hand holding' or be available to solve problems, leaving you free to move on. In some cases you may be asked to leave some money in the business, or asked to sell the business in stages.
4. Pass on or sell to family
Passing on or selling your business to a family member is more about succession planning and having a sufficiently interested, motivated and capable family member that is enthusiastic, willing and most importantly, able, to take over your business. In this type of transaction it pays to have a formal process in place to prevent any misunderstandings or family issues as it ensures transparency and encourages open discussion.
5. Liquidate the business
If, for some reason, you have little to sell, then your options may be limited to just closing or liquidating your business. You should always look to get a sale to transfer any business and dispose of your assets. Some business for sale websites have an “Assets Only” category.
When selling it pays to consider having a confidentiality agreement in place to protect relationships and avoid the information being used for the wrong purposes. Another safe guard is to release information in controlled stages, which allows you to gauge the genuineness of the buyer. Also, manage your advertising to ensure you get the exposure but don’t damage your reputation or give cause for any unnecessary concern. Using a third party like a Business Broker can assist here.
Whether you have only owned your business a short time or have many years under your belt, it pays to have a business exit strategy in place to ensure you get the best outcome when it's time to sell your business.
When considering closing or selling a
business it is important to get professional advice. For more information visit
For more on Preparing your Business for Sale
Or here to Sell a Business
By Richard O'Brien - aubizbuysell
Recommend this article:
- How to sell a business
- Profit vs value when selling a business
- Why have a business exit strategy
- The process of selling a business
- Who will buy my business
- Great business systems make great businesses
- Why use a business broker?
- Your options when selling a business
- What do business buyers want?
- Write a better business for sale ad
- Marketing your business for sale
- 7 business exit strategies
- Selling a business to get your best price
- Keeping your business relevant
- 5 Questions before you sell a business
- 10 questions to ask your business broker