This Close to a Clean Get-Away

So, you have spent many days, nights, weekends, and holidays building your family business – not to mention blood, sweat, and a few tears. While others were working regular hours and punching a time clock, you were taking care of customers, meeting payroll, paying for employee benefits, and contributing to the United States Treasury. On behalf of a grateful nation, thank you.

Are You Ready?

Is it time to think about spending more time with family, taking up golf, enjoying a little travel, or furthering your favorite charitable causes? What does that look like and, even more importantly, how do you get there from here?

Assuming you will not be selling to any family members, how do you sell your business for what it is worth in a win-win-win for you, your loyal employees, and the buyer? Very carefully.

Look Inside

Are there one or more key employees already inside your business who could take over the reins? If yes, then have you thought about selling to them? It would be a great arrangement for you if third- party financing were used to cash you out upfront.

However, if you have supreme confidence in the ability of these new “insider” owners to succeed, then owner financing may give you a higher return and spread the tax consequences over multiple years. In the right circumstances, an employee stock ownership plan (ESOP) provides a ready market for the business owner to sell and gives the employees tangible skin in the game as the new owners.

Look Outside

If an “inside job” is not in the cards for the sale of your business, then the sale of your business to an outside party is another alternative. One often-overlooked possibility is approaching one or more loyal customers. For example, if you have a popular barbecue restaurant, perhaps some of your regulars might want to buy it as an investment or to learn to smoke ribs for a living. As part of the sale, you could stay on long enough to teach them your secret recipes and leave knowing that your “baby” will continue without you.

One traditional arrangement is to sell to a friendly competitor. Buying your business would increase the market share, product line, or efficiencies of your competitor. If you go down that road, do not unwittingly disclose the “secret sauce” of your business success, including proprietary customer lists, processes, and trade secrets. Be mindful of such things as confidentiality agreements and non-compete agreements while you are at it.

Be Prepared

Before you consider any of these “inside” or “outside” options, think like a Boy Scout andbe prepared. This is the time to put the polish on all of your business operations – from marketing and sales to production, legal, and accounting. Regarding accounting, make sure there are no loose ends with the IRS and get a business valuation to see where you stand.

Assemble Your Team

Finally, do not go it alone. As you put the polish to your business operations, you will need to assemble your team of trusted advisors to make sure you have all the bases covered. To have the most successful outcome for all concerned, assemble your legal, accounting, and financial advisors early in the process. Not only will these advisors help you stay out of trouble, but they may know of potential buyers for your business.