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A relatively infrequent variation is to transition the business to your employees through a worker owned cooperative conversion.Advantages: Although IPOs get most of the press, they are actually very rare.The fact that the buyers are close to you makes this both easier and harder to complete.
As long as the company’s brand has any value, the company has a loyal or sizable customer base, or the company has a stable core of employees, the business owner would be significantly better off selling the company.
Another option is to just take as much cash as you can out of the business each year, while keeping enough in the business so it can continue operating profitably.
Most strategies only make sense for certain classes of business, so for any given business, even fewer options are viable.
Here we review these basic options, which types of businesses they work for, and outline the pros and cons of each.
Usually there is an asset sale of some kind, and sometimes the business name is purchased by someone else for pennies on the dollar and restarted with different owners.
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If a business has been around for a long time, chances are there is a substantial amount of “goodwill”.This may sound overly cautious, but in many cases even 5 years is not long enough.As a business owner it is very easy to become overly attached to your business and lose sight of what the business really looks like to an outsider.Be sure to engage an experienced professional so you protect yourself before, during and after the sale through a transfer of business ownership agreement.And, as with all other options, start planning early.Generally, the more potential buyers for your business, the better, since then you can establish a market price.If you’re looking to sell your business fast, you may be in for a surprise.This strategy makes sense where the business generates a lot of cash and requires little hand-holding by the owner.Examples might include certain manufacturing businesses, restaurants, nightclubs, real estate brokerages, consulting firms, and others.In other words, the business name (or “brand”) is valuable.If a business simply closes, this goodwill is usually lost.