It’s not uncommon for owners of privately held companies to have concerns, or even guilt, about how their decision to sell will impact those around them.
Suppose relationship considerations outweigh the profitability of the transaction. In that case, you might want to think about selling or transferring ownership to a family member, partner, or employee before exploring other possibilities. But bear in mind that this may not be realistic, sustainable, or wise.
For instance, in family businesses, the roles of parent and child often intertwine with those of boss and employee, leading to a complex and sometimes confusing dynamic.
“Parents continue to act like parents in the business, and when they do, their children tend to react like children. Many don’t learn to communicate adult to adult,” says Lynn Sykes, a succession planning consultant in the agriculture industry.
In these cases, planned successors within the family may not be ready or equipped to take over the company. So, you may not feel comfortable handing over the reins. These are valid considerations and definitely require some careful thought.
If none of those options work, you’re left with selling to a third party. Divestiture to an outside buyer is usually the simplest way to transfer ownership; it’s why acquisitions by large public companies and private strategic buyers are so common.
In all cases, it’s crucial to structure the transaction in your favor. The better structured a deal is, the more you can safeguard your legacy. To get there, you need to prepare your company. Some ways include:
- Form a dependable management team to establish long-lasting relationships with customers and vendors.
- Clean up financial records to present maximum value to potential buyers.
- Implement an organized reporting system to show historic performance.
- Assess the company’s strengths, weaknesses, and opportunities critically so you can address improvement areas and emphasize strengths to potential buyers.
Ultimately, early planning is key to maximizing the value of your business, regardless of the economic conditions or sale price.
Continue reading to discover the five steps to selling a business, from sales preparation to post-sale experience.
2. Preparing a Business for Sale
Have the Right Partner by Your Side
Paramax boasts years of unmatched experience in managing sell-side M&A transactions, from early preparations through negotiations to deal closure. If you’re looking for a partner who’s dedicated to your and your company’s best interests, contact us today.