Don't Sell Your Business - Transition it !
You have been thinking about business succession for some time and are ready to spend less time on the business and more time doing the things you enjoy.
You are concerned that now may not be the best time to sell your business outright due to the economic climate and worried that someone won’t buy it or worse offer you less than you deserve. Also, why sell 100% of your business now when the market may perceive it now to have a lower value?
Why not sell down 25% of your business to a talented person with capital who can share the burden, bring fresh ideas and help you grow it?
We have come across business owners who say their business has been impacted by COVID 19 and while they want to exit, they feel that the only option is to delay their plans and build it up again. Not all business owners are aware that the good news is that there is a better way to exit their business without sacrificing value or delaying it! In many cases, this requires pivoting the business and the owner may not have the energy or the desire to do things differently. There is the option of a business owner transition to a talented leader who can navigate these challenging times as they gradually buy out the owner.
Why transition your business instead of an outright sale?
1 You only sell 25% of the business at today's value and the other 75% at the value at the time of transaction. Greater wealth as the business grows.
2 A talented leader with energy, skill, and capital works with you in your business to help grow it.
3 As you sell down over time you start stepping back from day to day management and focus on the parts of the business you enjoy. Why not work 2-3 days a week and take extended holidays?
4 You continue to receive dividends based on a growing business.
5 You can achieve greater wealth and an improved lifestyle.
This can be a compelling business succession planning option in a "normal" market but can become even more compelling in challenging times and you don’t need to sacrifice value.
Now may well be the ideal time to exit your business - gradually.
Mike Warmington is a Director of Platform 1 NZ Ltd. Platform 1 finds people with capability and capital for SME business owners wanting to transition and sets up a structure and governance for this to succeed.