After You Sell, What's Next?
After carefully weighing your professional and personal goals, you've decided that it's the right time for someone else to handle the herculean task of owning and operating your small business. Although exiting the business you've owned (and possibly started) might be bittersweet, you're excited about moving on to the next stage of your life.
So far so good, right? Maybe not. Some business sellers never reach the next stage because they didn't incorporate their desired sale outcomes and future plans into their selling strategy.
At the end of the day, all sellers have the same goal--to attract qualified buyers and receive the best possible price for their companies. But it's what you intend to do the day after the deal is finalized that will shape how you market your business, negotiate terms, and execute the sale.
Managing the Sale
A successful business sale is a balancing act between seller goals and marketplace realities. Whether you plan to retire, buy another business or even work a normal nine-to-five job, every decision you make about your personal goals will change the way you present your sale to buyers--and vice versa.
At BizBuySell.com, our sellers have a broad range of goals and desired outcomes. To achieve these goals, there are several key issues and concerns they need to manage during the sale process.
1. Financial Position
The prevalence of seller financing in today's business-for-sale marketplace is a problem for sellers who want or need to receive all proceeds at the time of sale. If you are retiring or can afford to delay receipt of a portion of the selling price, seller financing will make your company much more attractive to prospective buyers.
But if your company is heavily financed or if your goal is to buy another business, seller financing may not be an option. So to raise your company's profile with buyers, you need to begin preparing for the sale earlier, positioning your company to attract top-tier buyers capable of self-financing or securing capital from a third-party lender.
2. Company Involvement
Many sellers are surprised to learn that hands-on involvement with their companies might continue after the sale. Often, the buyers of small businesses want the seller to remain actively engaged in the company for a period of months or years, as a consultant or sometimes as a paid employee.
If your goal is to make a clean break from the business at the time of sale, you need to make your intentions known to prospects early in the process. On the other hand, if your future plans enable you to remain with the business after the sale, be sure to advertise your availability and use it as a tool during negotiations.
3. Business Continuity
In family businesses and companies where there is a deep, personal connection, it's common for the seller to be concerned about the continuity of the company. Although you may have future plans that are unrelated to the business, your primary motivation is to see your company flourish for the sake of your employees or the next generation of family members.
The ongoing vitality of your business is an admirable goal. But it may involve making certain concessions that could jeopardize your post-exit plans. For example, family members almost always expect seller financing and a below-market price when they acquire the company. If you're selling the business to your employees you may need to make similar concessions, so it's important to evaluate the implications of your decision before you pull the trigger on the sale.
4. Ability to Compete
Buyers want to protect their investment and frequently require a guarantee that the seller won't open a similar business in the same geographic market, at least not for a while. The way they achieve this guarantee is through a non-compete clause--a contractual mechanism that prohibits sellers from directly competing with the buyer for a specific period of time.
But what if your goal is to pursue employment at a company in the same field? Will a non-compete clause threaten your ability to make a living after you exit the business? These are issues that need to be considered and resolved prior to signing the closing documents.
For sellers, the best advice is to avoid taking anything for granted. If you aren't sure how your personal goals will impact the sale process, consult a business broker and other professionals for guidance.
Note: This will be my last column for Inc.com. I would like to thank Inc. for the opportunity and send my appreciation to all the readers who interacted with and shared the articles. For more articles on buying and selling a small business, I encourage you to read upcoming pieces by Curtis Kroeker, the new group general manager of BizBuySell.com. Farewell and thanks again!