An Alternative Business Sale Option
There is a lot of discussion now about the wave of baby boomers looking to exit their SME businesses. Many have built up good businesses with positive cashflows that have afforded the owner a comfortable lifestyle. If the owner has no family or employee succession options they generally expect to market via an outright sale and enjoy a relaxed lifestyle with the proceeds.
What many business owners don’t realise however is that not all businesses that are marketed for outright sale actually sell!
The reasons for this are varied and include things like too high a valuation, competition, dependency on the owner and a lack of preparation. What is shaping up now, however, is another major obstacle to a business sale being the sheer volume of businesses on the market and the number of people willing and able to buy these businesses.
Significant numbers of SME businesses expect ownership changes in the next 5 years. It’s clear there is starting to be a wave of businesses on the market and competition with be tough. Business owners will need to be very well prepared and able to substantiate their valuation expectations or get creative on their succession options.
A gradual sale can be a lucrative alternative to an outright sale. Someone with both strong capability and equity works alongside you to grow your business as you exit over time. You are more flexible to focus on specific areas of the business that you enjoy and a rewarding lifestyle outside of the business. You will have the cash to do this through higher dividends and equity payments as the business grows while you start to step back. By having someone talented buy your business there is also a greater chance of protecting your business legacy.
If you are interested in still working on your business and not in it then selling down gradually is a great option to consider.
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.