Planning to Sell Your Business? - Know your objectives in the sale of your business
In selling a business, your motivations are the key to determining the sales process. However, the way the sale is to be structured is dictated by your objectives, or your expected outcomes of the sale. The deal’s structure would be very different, for example, if your sole objective was to get the highest price for the business without regard for your employees, than if one of your primary objectives was to do the most to protect your employees. The former would require a completely different buyer and deal than the latter. So having clearly defined objectives at the outset is critical to achieving a successful outcome.
Defining and Prioritizing your Objectives
You will also need to determine which of your goals are non-negotiable and which are in play for negotiation or compromise. The more specific your objectives are, the more precise your plans can be for achieving them. Also, it's important to prioritize your objectives because it's not always possible to achieve all of them, and some may even create their own conflicts. For example, if your primary objectives are to have your business remain in the family and maximize your price, you may not be able to realize both, because you're more likely to get top dollar from a third party buyer. In this case, you may have to sacrifice price or agree to an extended payment term in order to ensure an internal transfer.
You Need an Exit Strategy
Your sales objectives provide the framework of a formal exit strategy. This becomes the blueprint for making all exit planning decisions. The exit strategy should include a concise statement of your personal, financial and business goals, prioritized by importance. No two exit strategies are alike; however, they all should contain the following components:
- A target date for the exit
- A plan for maximizing the value of the business
- A determination of how to exchange the value of the business for cash in the most tax-efficient manner
- A determination of whether the business is to be transferred internally or externally
- A plan for ensuring the continuity of the business during the transition to new owners
- A determination of the role, if any, the owner will have with the business during the transition and after the transfer
- A plan for ensuring the financial security of the business owner and his family