Many business owners are truly committed to their businesses. As a result, it is very difficult for them to step away even when they approach retirement age. It is not uncommon for business owners to keep working into their golden years sometimes by choice and sometimes due to external factors. But the truth of the matter is that at some point almost everyone will need to embrace retirement whether it is for health issues, family issues, moving to a new location, or simply for greater peace of mind.
If you see this path approaching for you in the near future, it could feel overwhelming. After all, most people have not sold a business before. As a result, they feel unclear about the process and don’t know where to start. However, everyone should be thinking about the eventual sale of their business because this future event should determine many of your current activities and decisions as well as represent the largest financial event of ones life.
Let’s take a look at some things you can do well in advance to ensure that an eventual sale of your business goes as smoothly as possible.
What we are talking about here is referred to as “key man concentration”. When prospective buyers look at your business, they will want to be able to easily envision it operating smoothly without you involved. Similarly they do not want any single employee to be too critical to operations. Because a good portion of business owners and some employees are so integral to the functioning of their businesses, it can be difficult for them to figure out how to decouple themselves from operations. In some cases, this process can take years.
Now is a good time to consider this issue and what you can do to make sure your business can function without you one day. Give some thought to who at your organization could be a second in command. Consider installing a management layer if the business can justify it. When a buyer sees that a competent and knowledgeable employee will be staying on to assist them, it can go a long way in allaying any concerns and even maximizing the sales price as the business is less risky.
Put Yourself in the Buyer’s Shoes
Imagine you were buying your business. What kinds of issues might be of concern to you? Chances are these will be the same issues that could concern potential buyers. Once you have identified any spots of weakness, you can start to zero in on figuring out how to handle them.
First and foremost, you will want your buyer to feel confident that there will be a smooth transition and that they can almost immediately begin to profit from their purchase of your business. Anything that you can do to help ensure that is true will benefit the sales process which almost universally includes a transition period of appropriate length.
Business brokers and M&A advisors are experts in the field of buying and selling businesses. They will help you to properly evaluate your business and look for these areas of weakness. Through this means when you do decide it is time to retire, the process will be more efficient and less stressful.