Buzz Harris
For many business owners, day-to-day responsibilities can be very atypical. On some days they have marketing issues to concentrate on while other days purchasing decisions might be their focus.
For most owners, there are many days where all these issues and more, can occur simultaneously.
For those reasons alone, it is easy to understand why some business owners do not take the time to map out an exit strategy. Coupled with the reality that many people's lives are very busy, whether you own a business or not, one can appreciate some of the challenges that a business owner faces when contemplating such a step.
A good starting point for a seller is identifying the types of business sales that occur. By doing this, owners can begin to formulate business strategies that will make their company attractive to potential buyers.
Some of the more common sales transactions are as follows:
For many owners, a succession plan or where a key employee purchases the company can be an excellent way to keep their company and its employees together, but the seller needs to be aware of the sensitivities of those who are not chosen. They also need to make sure the employee has enough money.
Other owners wish to leave their business to their children or other family members. This can be attractive when practical, but also potentially disruptive. They also need to make sure the members have enough skin in the game.
It's one thing to pass a company over to a non-family member; it's another when you must choose one family member over another.
Another way is with acquisitions, where the owner sells their company to another company, usually larger, which is attracted to the business because of the business’s distribution channels, technology, production mix which would strengthen its existing components.
A merger is another way for a seller to step out of their business, usually gradually.
This is like an acquisition, however the assets of the two merging companies form a new entity. In this case, there might be some requirements for the seller to stay involved in the business for a predetermined amount of time.
An outright sale to a third party is the most common. Contrary to popular belief, almost all types of businesses can be sold. An owner doesn't need to just have a large manufacturing or retail business to be able to sell it.
We have been involved in the sale of several professional companies, big and small, such as marketing companies and contracting businesses, where a built-in customer base and infrastructure was very attractive to buyers.
A dream for many owners is taking the business public. Unfortunately, for most owners that is all it is. However, when feasible it can be very rewarding.
Sellers need to remember not to fall into the trap of focusing all their efforts on a single group of prospects, no matter how attractive it might seem. If the buyer knows they are the sole interested party, they can control the negotiations.
Buzz Harris is a Licensed Business Broker with The Liberty Group of Nevada. Contact him at BHarris@TheLibertyGroupofNevada.com.
