It may be time to get out of business. Maybe youve made enough money, or maybe youre just tired. Perhaps you want to build another company. Whatever your motivation, you would like to continue this new road while still having your health and ambition. You need a business termination strategy.
If the business is a good, you may want to see it survive. Rather than selling it to the highest bidder, you may prefer to keep it in your family and send the business to your children or another relative or sell to an employee.
Many entrepreneurs dream of moving on to the next generation. Unfortunately, family success usually does not succeed. It has been reported that 70 percent of family companies do not survive the transition from the founder to the second generation.
Family driving and other dysfunction often try to track the activity. The founder refuses to cede the check. Founder parent installs his favorite child as a leader, which is not suitable for the role. Next generation leaders and managers are poor decision makers. The siblings denied the role of executive conferences with the chosen one.
The founder parent must take carefully considered steps to create the conditions for second-generation success to occur. Its important to distinguish between business executives, managers and owners and make sure nobody feels devalued. It will be the founder parent to preserve not only business but family relationships, and remember that family gatherings should be happy occasions that all family members want to attend.
If you want to pass on business to family members, start by asking them if they want to become second-generation owners. If anyone or everyone agrees with the proposal, contact a family business specialist to help with the process.
The ability to pay tribute to your hand-picked successor is a wonderful thing and recruit a specialist to help you choose the candidate who is best qualified to assume that your intestines will go far to ensure next generation business success. Check out the graduate management program at a local college or university to find out if a family business specialist is available to help with the transition and follow-up of family business coaching.
Sell to employees
If no family members are interested in owning and running the business, one or more of your employees might be interested in buying you. Do not be shy about raising that opportunity. What better way to increase trust and morale than to let valuable employees know that you trust them enough to place your precious achievement in their skillful and thoughtful hands?
Sales to employees can be a good starting strategy. Employees will be able to invest in a company that they know and trust. They are aware of the challenges and opportunities that the business may encounter. They know the customers and the customers know them. They have institutional memory and know how things are going.
Encourage employees as you know would make successful business owners consider a buy-out proposal or employee stock option plan ESOP? Call your business attorney and or accountant and make sure you have the best legal structure for the exit strategy you choose.
Finish the business
If your business has tangible assets and healthy sales, your exit strategy can give you either a retirement egg or start-up capital to create another business. Keep your options open and start the preparations early.
Maintain detailed and credible financial items show profitability show good cash flow Keep your debt to equity low. Expect to show a potential buyer or your family members 5 years of data. If the business owns property and or equipment, make sure everything is in good condition.
To sell your business at a price that accurately reflects its value, first discuss with your accountant and business lawyer, then with a company valuation expert or assessor and then with a business broker. Your accountant or lawyer can also know the right buyer for your business.
An accurate assessment is a must when planning to leave your business.
Asset Valuation. The value of inventory and equipment, business features, customer list and even company reputation.
Industry Valuation. Based on sales prices for similar companies in your industry and geographical country.
Cash flow valuation. Based on the companys expected future cash flow, as shown by previous results.