What You Really Need to Know About Selling Your Business to a Third Party

Selling a company to a third party is an action business owners take for a multitude of different reasons. Sometimes, they’ve fallen out of love with the work itself and are not as engaged or fulfilled as they once were. In situations like this, the business may be more successful in someone else’s hands. Other times, an owner wants to make a lifestyle or professional change, and selling their business is a powerful way to do it.

Regardless, it’s important to understand that this process is longer and more complex than owners often realize. According to one survey, 44% of business owners said that they believed the entire process from start to finish would take less than five months. On the other hand, brokers insist that the process can take anywhere between six and 11 months, depending on a number of different factors.

When Selling to a Third Party Makes Sense

If you run a business that is particularly enticing to buyers in the current market, selling to a third party might be the right move for you and your business. Due to current global circumstances, technology and IT organizations are particularly desirable to buyers. The same is true of healthcare organizations, and even fitness and lifestyle businesses.

Owners may also want to consider selling their business to a third party if the market they operate in is thriving at the moment. As a rule of thumb, it is better to sell when business is particularly strong. If the market your business operates in is weak at the current moment, there is a significant chance for potential growth in the future. This means there may be the opportunity to make more money by delaying the sale of your business.

Finally, the timing may be right to sell your business when you’ve located the right buyer. If you’ve found a third party who seems to care just as much about the future success of your business as you do, it’s an opportunity that you should consider capitalizing on. Not all buyers are created equal, so when you find one that is an appropriate fit, it may be time to strike while the iron is hot.

Additional Considerations About Your Business Transition

Once you have decided that selling your business to a third party is the right move for your business, there are a number of critical factors you’ll want to keep in mind.

You will want to consider the necessary steps for the closing of the sale and what actions you need to take on your end of the deal. For the best results, you should have paid down most, if not all, of your business debt prior to discussions of selling your business to a third party. Doing so makes your business as attractive as possible to potential buyers. Then, you’ll want to gather all documents the potential buyer will need, such as lease information, tax statements, cash flow and income statements, and vendor contracts, among others.

You’ll also want to ask yourself thought-provoking personal questions to help better determine what your post-business ownership life will look like. Do you plan on staying involved in the business at a limited capacity, or will you sever ties completely once the sale goes through? Have you considered ways to maximize your post-ownership income to continue to enjoy the lifestyle you’ve worked hard to build? These are important factors to consider and should be thought through.

Finally, before you execute the transaction and sell your business, it is imperative to think about your employees, who have been an integral part of the process of getting you where you are today. Working with a Certified Exit Planning Advisor is a great way to help you create an exit strategy that includes the ways you’ll be responding to the important questions your employees will have about the future of the business and their personal futures.

During these conversations with employees, it is not necessary to go into details of the sale itself. Rather, you’ll need a plan that keeps employees in the loop to avoid any unnecessary stress and hassle as the selling process moves along. You’ll also want to introduce employees to the new owners of the business when the appropriate time presents itself, so they can get acquainted with who they will be working with moving forward.

If you are considering selling your business to a third party, or if you have any questions about your specific situation, set up a time to talk with our team of Certified Exit Planning Advisors. Contact Prometis Partners today.

VINCENT MASTROVITO

vincent@prometispartners.com
(616) 622-3070
250 Monroe Ave. NW, Suite 400 
Grand Rapids, MI, 49503