Different Ways to Sell a Business
Selling your business is a tough decision. It’s your hard work that went into creating it, making it work, and getting people to work for you. It becomes close to your heart, however, a time comes when a business can no longer remain yours. At some point either it has to be passed on to the next generation or sold off. This could be due to following one or more reasons:
- it’s not being profitable anymore.
- there is too much competition.
- the debts are too many.
- the incoming is not able to manage them.
- the owner wants to get into a new line of business.
This feels like a personal loss to any business owner. Not researching the best ways to sell a business or pass on adds to that loss. There are quite a few ways to sell a business depending what type it is and what resources you have:
Preferred by many businesses is option of liquidation. In this option all the assets of the business are sold to get the money. Liquidation is mostly considered as an option when the company needs to pay off its debts. The money received from the liquidation is divided among many things. The business owner gets the amount that is left after paying creditors, employee salaries and other pending debts.
2. Fire Sale
Fire sale is an option chosen by those who want to sell their assets as soon as possible. The idea is to sell off everything at prices that are lesser than the ones in the market to make as many sales as possible. Here the challenge is to get a decent negotiation on the prices and could sometimes lead to selling the assets in less than the desired prices.
3. Giving to Your Children
Some business owners opt to transfer business to their heirs. When they cannot manage it anymore and don’t want to shut it down then they go for this option. It seems to be a good choice. They need to be careful of the laws around the transfer of the company. Seller should make sure that:
- the heir who is given the responsibility can do justice to it.
- is accepted by the staff and clients.
4. Sell to key employees (ESOP)
ESOP is a good option when the business owner wants to generate some capital but does not want to lose the business. Here key employees are given stock options. This works well for the company as the morale is boosted. More people have a stake in the performance of the business. It has also been found that businesses where employees have a part like this do much better than those who don’t.
5. Sell to a third party
Selling your business to a third party may not sound like the best option but is actually is quite beneficial. This option comes to the rescue, if business owner:
- cannot find an heir to takeover
- knows that liquidation is either not possible or not beneficial or
- fire sale is either not possible or not beneficial.
It is fast, and it ensures that the employees in the company will not have to be unemployed. As the business was sold off, the decision may base on the new owners. Most of the employee will still have jobs.
ABOUT THE AUTHOR
Alam Qureshi is a Certified Business Intermediary (CBI), Certified M&A Professional and Broker of Record at ProClient Brokers Inc., Brokerage. He helps business owners learn how to sell a business so they can get the maximum value for their company. call us 416 364 5550 or CONTACT US to get in touch.
Date modified: 6-5-2019