Who Will Buy Your Business?
Don’t let time run out for developing an exit strategy that gives you maximum value from your business. Too often we talk with business owners who are ready to sell yet haven’t taken any steps to prepare their business to be sell-able.
There are at least six ways to exit a business, and only two of them don’t need a plan: bankruptcy and liquidation. If neither of those are appealing to you, then you should be planning to exit in the most desirable, and profitable way for you and your business. There is a Secret To Selling Your Business, and it starts with you being aware that your business should always be ready to sell, because you never know when you’ll need to sell it.
Consider your exit options:
- Management or Employee Buyout
- Hire A Buyer
- Sell to, or merge with, another business
- Sell on the open market to a private buyer
Management or Employee Buyout: According to the National Center for Employee Ownership, if you have 15 or more employees, you may be a fit for an Employee Buyout. This exit strategy is structured to provide employees shares in the company’s stock. For this strategy to be viable the company needs to have a strong management team in place and must be profitable enough to pay for the costs of buying shares.
Hire A Buyer: If your business isn’t a fit for Employee Ownership, but you're hesitant to go to the open market to find a buyer, you may want to consider the Hire A Buyer strategy. Ideally this scenario has at least a 3-year path to exit. It starts with you identifying the desirable qualities and expertise you want in a buyer, then going to market to find the right fit. An ideal candidate is one who has enough entrepreneurial spirit to desire ownership but is lacking the capital to purchase a business on their own. After you agree on terms, your Hire A Buyer employee goes to work for you, earning both a wage and equity in your business. At the time of your exit they can leverage their equity, and additional personal capital, to qualify for a loan to buy you out.
Sell to, or merge with, another business: Another option is to sell to, or merge with, a competitor, supplier, or another business that is seeking what your business can give them. For example, if you have employees with deep industry experience, a proprietary product, or dominance in a specific marketplace or customer demographic, your business would be a very attractive acquisition. Simply put, it’s often easier for a business to acquire these attributes than to organically grow them.
Sell to a buyer on the open market: Most small business sales are to a private individual, or a group of individuals that want to invest in and operate a business. According to Business Broker’s Network, the nation’s largest Business Intermediary Exchange, approximately 70% of small business buyers are first-time buyers. These buyers want businesses they are excited about owning and growing, and are attracted to businesses with strong cash flow and growth opportunities.
By putting on Buyers Glasses and understanding what your most likely buyers are attracted to, you can better prepare yourself and your business for your exit. Don’t wait too late to understand your exit options, and identify the strategies for maximizing the value you receive from your business.