When a business owner considers selling their business, it is likely due to one of the following reasons.
- Some may be tired and frustrated with the day-to-day operations of their business.
- Some have a desire for more free time to spend with family or manage their life obligations.
- Others are struggling with their finances and feel like they are in over their head.
- Some wish to move into retirement.
- And still, others want to sell their business when it is experiencing a high level of success so they can receive a high return on their investment.
Whatever the reason for selling, one piece of the sale process often overlooked is the transition. A well-planned transition can mean the difference between continued success for a business and a floundering new owner. After having spent generous amounts of time and money on their business, most business owners would rather watch their old business continue to succeed. There are a number of questions and factors that are critical to the successful sale and transition of a business. Below are some key questions for owners to consider so they can begin to prepare for their transition period.
Is your business transferrable? Can someone else actually operate it? In considering what role you will have in the transition, it naturally brings up the question, can the business even succeed without your involvement? This is a great place to start transition preparations. When selling your business, one of the ways to make it attractive to buyers is to remove yourself from the day-to-day. To do this you may need to train an employee to take over your responsibilities. Another way to support this is to properly document standards, processes, and procedures. The easier you can make it for a new owner to step into your place, the better off your business and the transition will be.
What role will I have once my business sells? A good place to start for this question is to consider the following:
- Do you want to have a large or small role in the transition period to the new owner?
- How complex are your business operations and service offerings?
- How big or small is your business?
Providing some level of training to the new owner is a good way to attract buyers, but it also helps ensure the continued success of the business. The businesses Transworld lists typically offer 2 weeks of training with the sale of their business. We also have listings that offer 1 week all the way up to 4 weeks of training. The length of training you offer will largely be tied to the size of the business and its operational complexity. Very few businesses will transition successfully without any assistance and support from the previous owner. There are too many moving parts such as books to review, processes to manage, and employees to integrate for the new owner to manage without guidance.
Will your business relationships transfer with the business? This is a very critical question. Business owners spend years developing a rapport with suppliers and customers and strengthening their business relationships. These relationships are integral to the continued success of the business. If you think suppliers and customers may not be open to working with a new owner, it would help for you to facilitate this area of the transition. Taking time during the transition to personally introduce certain suppliers and customers to the new owner, will help them build their own trusted relationship.
Will your employees stick around after the transition? The answer to this question can be difficult to predict, but it is still important to consider. Because of the confidentiality needed for the sale of a business, employees are usually kept in the dark until the sale is finalized. But key employees can be a big part in helping with a smooth transition so it is important to consider how to appease them during the transition process. Transworld recommends that the previous owner takes the time to introduce employees to the new owner and help them build a relationship. The previous owner can also make themselves available to employees to help answer questions about the transition process to allay lingering concerns.
What will you do once you sell? This is obviously a very personal question. While some business owners sell so they can retire, it is not uncommon for sellers to experience boredom or a lack of excitement once they no longer have a business to manage. This is why Transworld likes to ask our clients to really think about what they plan to do after the sale. More than a few times Transworld has seen sellers come back to us wanting to buy a new business! So it would behoove you to ask yourself what you plan to do moving forward. In asking this question, you help ensure that you will be satisfied with the transition period.
If you have more questions on how to prepare your business for sale and what to consider when planning the transition, please schedule a consultation with one of our experienced brokers.
Cameron Pourhassanian a Business Broker with Transworld, brings years of experience in the technology industry and sales management to the table. His experience stems from managing technology solutions for national companies and large corporations as well as small to medium sized businesses. Having had experience in varying industries spanning from nursing homes and medical facilities to manufacturing and retail, Cameron understands the challenges that business owners face and loves seeing them grow and succeed. He now enjoys helping current and prospective business owners navigate the often difficult process of buying, selling, and growing businesses via acquisition.