As we discussed in last week’s article, the first part in my two part series on Options for Selling Your Business, there are many ways to transition a business. Last week, we reviewed 4 internal methods, this week let’s take a look at our 4 External methods of transitioning:
- Sale to Third Party
If done properly you can potentially receive a higher price when transitioning. By selling to a third party, owners may leverage more cash up-front while permitting a transition sooner after sale. Be warned, as third party sales can take up to a year to complete and can tie down an owner for a few more years to help the business through the transitioning phase.
By recapitalizing, an owner brings in a third party investor or lender. This allows the owner to partially exit the business while providing capital to grow and reduce the owner’s risk in the company. A downside to this method is that it can cause a loss of control for the owner which may change the culture of the company.
While this method is great it isn’t for everyone as it only applies to about 0.3% of privately held businesses. This option allows an owner to step back and collect on the business they have built. In the process it takes away ownership and grows the company in the best interest of the investors and not necessarily the company.
- Orderly Liquidation
This method applies if there are no other options for a business owner to exit his business. This should be the very last option when all other methods have been exhausted.
To recap our blog series on options for selling your business:
-Weigh all options when preparing to transition from your business.
- The sooner you prepare your business the more options you will have.
-It will not be a quick process and may take years to properly transition.
-Pick the best option for you and your business not what pleases your family
Jon Gyles can be reached at: firstname.lastname@example.org