Ownership Transition – Key Things to Consider

by on Apr 2, 2017 8:50 AM

All of our clients own businesses, and a recent Washington Post article claimed that sales of small businesses hit a record high in 2016.  From time to time, business owners get to a point in their lives when they want to map out an effective exit strategy for at least two reasons: 1) they would like to enjoy themselves while they’re still in good health; and, 2) they want to ensure their company’s legacy for the sake of their employees (and customers).

Trilogy Partners is currently working with a number of clients to transition business ownership either to internal hands (remaining owners, employees and/or relatives) or external hands (other companies or entrepreneurs).  In both instances, the owner is usually interested in maximizing the sales price, while also ensuring that the business can afford to survive.  In my experience, what’s not obvious to most business owners is that they must work themselves out of a job in order to maximize sales price and let others take over their legacy where they left off.

The idea of working themselves out of a job – even to maximize the sales price – is a tough pill to swallow for most business owners, especially for founders.  It’s not that the founder’s talent, skill and knowledge go unrecognized; it’s just that the new owners want to run the business, and they really can’t have anyone standing in the way.  Your mere presence may cause confusion to employees and customers.

Your business has to be sustainable without you in it if you want to achieve the best sales price and the best contractual terms as well as to ensure that your legacy will live on.  The business buyers you desire will view your business as a stream of cash flow, so the more confident they are that the stream won’t dry up, the more your business is worth to them.  Obviously, remaining successful will require that your best employees stay on to operate the business.  Smart buyers will provide incentives to those employees to entice them to stay on, and they won’t micromanage them.  If you value your legacy and your employees as much as you value protecting your net worth, keep this in mind when selecting a buyer.

Is Your Company Ready for Your Departure?

Here’s a simple test to discover how ready your business is to sustain itself without you in it: If you died today, what would become of your business?  Be honest with yourself (and write it down).  List what you must do to achieve a better outcome.  Don’t be surprised if it looks daunting.  With good professional help, and plenty of willpower on your part, you can create a sustainable business that runs without you in it.

Get Professional, Experienced Help

If you want to ensure that your legacy lives on and take a vital step towards maximizing the sales price of your business, get experienced help to prepare your business for sale.  At Trilogy Partners, we work with clients to ensure they have a sustainable business strategy, an organizational structure designed to implement that strategy, and the right people in the right seats.  We also help our clients clarify personal motivations and goals which in turn helps them to make better decisions when navigating the complexities of selling their ownership interest.

If you are considering a future transition and want to know how Trilogy Partners can help, please contact Peter Lachance at 609-688-0428 or at plachance@gettrilogypartners.com.