You have owned your business for some time now and you may be thinking of retiring. Or maybe moving on to your next great challenge since you’ve got this one all figured out. Depending on the size and structure of your business, the exit strategy may not be the same. For example, if you own a good sized firm with plenty of assets and a good track record, you may want to simply consider selling the business. You would probably bring in an expert to do a valuation on the business and that becomes the starting point for the sales option.
If your business has a solid staff with some key employees who have been involved in the enterprise for many years, you may have been thinking about a transition plan that involves one or more of your key employees. Assuming they are interested in remaining in the business after you leave, they may want to purchase the business or you may decide to leave the daily operations part of the business, and, just like “ol’ blue eyes”, become The Chairman of the Board.
But what if you own a small business, maybe a retail shop, a plumbing and heating operation, or a service business? The options may not be as straightforward. If it is a family business and a younger family member (like a son or daughter) are involved and interested in carrying on, there should not be a problem. But if you don’t, selling a small business may not be very easy. You probably are thinking of all of your “blood, sweat, and tears” that went into making your place a success and want to be compensated for all that hard work. On the buyers side, your asking price (after all, you want to retire!) may be more than one wants to pay for a small business (Translation: lots of work and uncertainty on my part to pay for your retirement).
If you are in that position, why not look to a youthful solution? Someone with fresh and different ideas who would love to own their own business. But you might say “They can’t afford to buy my place!” Maybe true, but there are options. Use our company as an example. We do Small Business Bookkeeping, Business Planning and Taxes. Even in the best of situations, a potential buyer knows that they can probably open up their own business and a portion of our clients will end up their way anyway. But what if you locate a young professional, perhaps one who is a trailing spouse, who would love to stay in the area but for lack of a job that fits their training?
If you do, the offer might be a small up front initial salary to them, but with a percentage of the business that increases every year. So after year one, they may own 20% of the business, at the end of year two they have 40 percent of the ownership, and in the third year , for a payment they now can afford, they take over ownership of the company. After that, you may negotiate to stay on for another year to aid in the transition.
Look at what this accomplishes:
- We have brought new and fresh ideas into the business, increasing revenues in the process.
- The existing business owner has a viable transition plan with the business headed up, not winding down.
- A young professional may be able to realize the dream of owning her own business much earlier than otherwise possible.
- The prospective new owner may also be able to live and work in an area that, without this option, may be forced to move away.
Think about the possibilities.
About the Author: Ron Miaso, one of the QuickBooks Yoopers, is a Certified QuickBooks ProAdvisor in Desktop and Online and before forming Delta Business Solutions was a Senior Finance Manager in the auto industry where he managed a $500 million annual operating budget and helped develop long range business plans.
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