Numerous potential obstacles affect the process of sale or transfer of a business. Predicting and successfully managing such challenges makes the owners drivers (versus: mitigators) in an exit from the business.
Potential obstacles explored
The prospect of losses on the transfer or sale of the business will prolong the owner’s stay as he or she tries to improve the business to a point where it can at least guarantee a comfortable retirement. A lack of interest outside of the business will make the prospect of stepping away very overwhelming.
Not trusting the successor’s abilities to lead the company will delay the owner’s exit and relinquishing of key roles & responsibilities. The owner may lack the ability, patience and willingness to transfer critical knowledge to successor.
These potential obstacles can be overcome through deliberate actions by the owner.
Prospect of losses
Allay potential buyer or successor concerns regarding the business’ continued sustainability:
- Take steps to make the business operate independent of the owner. Put repeatable systems in place that existing and new employees can easily adapt to.
- Diversify the customer and supplier bases.
- Reduce the business indebtedness.
- Strive for profitability over the next 2 to 3 years.
- Ensure CPA-prepared financials are available for at least 3 years.
Explore potential tax-saving opportunities on the sale or transfer of the business.
Lack of outside interest
Take steps to gradually hand off roles concurrent with an incremental increase in vacations, and community/philanthropic activities.
Not trusting successor’s ability to lead
Assess the strengths and weaknesses of potential successors. Prepare an action plan to remediate gaps.
Lack the ability, patience and willingness to transfer knowledge
Meet regularly with potential successors, to explore strategic and operational improvement ideas. Strive for open, continuous and patient dialogue.
It is incumbent on business owners to proactively identify and act upon potential obstacles of sale or transfer. Successful navigation of these challenges will help ensure that they are drivers, not mitigators, in achieving a profitable exit from the business.