Sell Your Business Gradually and Reap the Rewards
For many business owners, succession planning is a subject that can easily be put off when juggling the demands of running a busy business. With an increasing number of baby boomers approaching retirement, the business sale space will become even more congested resulting in more sellers than committed buyers. Business owners who start planning early can increase their exit options.
While many owners look for an outright sale, this may not always be the best option. Most business owners like being involved in their business and it is a key part of their life. Do they all really want a full divorce? A gradual sale is often a viable alternative allowing the business owner to start stepping back from day-to-day management whilst still playing a role in the business. The owner can then work “on the business”, not in it.
How can a gradual ownership transition work effectively?
A strong (normally ex-Corporate) leader with the capability and some equity is brought into the business and a structure is set up with the relevant agreements. An Advisory Board is also established to provide governance to ensure the transition works smoothly, while the outgoing owner gradually steps back and eventually moves into more of an advisory role. Based on the agreed structure, the incoming owner increases their equity stake in the business over a period of time.
How does this benefit the outgoing owner?
- A better lifestyle without the day-to-day responsibility of management.
- Fresh ideas are introduced to help accelerate growth for the owner to share in.
- They can stay involved in the business and work on the areas they enjoy.
- Financial returns will be greater than an outright sale.
- The legacy of the business is maintained.
When looking to exit your business start preparing early and you will increase the succession options available.
About the Author
Mike Warmington is a Partner at Platform 1
Platform 1 finds talented people with capital who work alongside business owners to grow the business while the owner steps back and gradually exits.