Get Ready for the Day You Sell Your Business

As your business grows and as time goes on, there may come a time when you want to pass on the business or when it should get new ownership. How do you prepare for the day you sell your business?

There are many ways a change of ownership can create growth for the business:

  • New owners bring new capital
  • New owners bring new expertise and management
  • New business systems, procedures, employees, and customers

Sometimes it is not that the new owners bring something, rather the initial owner could be standing in the way of the business’s growth. Perhaps, you are better at starting businesses, rather than growing them. Perhaps, you can lead the growth, but you do not want to take on the risks and work involved. It is always a choice to withdraw from the business, earn money from the sale, and create a new future.

It is always a good idea to be prepared, especially for a change in ownership. A prepared business can be worth much more.

The Bridge to Change of Ownership

GrowthWheel provides a 360 perspective on succession planning with 12 steps for seller and buyer that involves four phases.

The 4 Phases of Succession Planning:

  1. Succession Plan Considerations
  2. Maturing for Succession
  3. Executing Succession Plan
  4. Post-Succession

Succession Plan Considerations

Consider both the personal and financial aspects of a change of ownership.

How do you want to sell the business? What is your future role in the business? What about your employees?

How much do you want to sell the business for? What are the payment terms? Do you want to keep your shares? What are the tax and inheritance implications?

You will want to prepare yourself for the succession process.

Maturing for Succession

Before you sell your business, you need to prepare by conducting a 360-degree analysis of the business which may involve trimming, quality assurance, developing the business, and making other changes.

Getting ready can also involve identifying the right type of buyer as well as making the business less dependent on the current owner by documenting procedures, training, delegating, etc. There may also be some branding and marketing involved to strengthen the brand and make it worth more to the buyer. Lastly, you need to prepare sales materials that can be given to potential buyers.

Throughout this phase, try to monitor sale opportunities and buying opportunities. This can help prepare yourself so that you have an idea of what type of buyers and offers you are looking for.

Executing Succession Plan

Executing the succession involves a final valuation of the business and negotiation. The value of a business can depend on many factors including:

  • Historical earnings
  • Future earnings
  • Cash flow
  • What similar businesses have sold for
  • Technologies & systems
  • Customers
  • Brand

Ultimately, the valuation is based on what the seller is willing to accept and what the buyer is willing to pay. Once a consensus is reached on the valuation, the legal documents are drafted by a lawyer. The buyer often conducts due diligence.

This phase concludes with the closing where the exchange of ownership takes place, final documents are signed, and the money is exchanged.

Post-Succession

Once the exchange of ownership happens it usually starts a transition period. This can involve informing employees, customers, and suppliers before making the news public.

Then the transfer of management takes place and the farewell begins. There may be a final day of work, or you may stay on to perform certain tasks for a given time period. Finally, it is time for the owner to decide what is next!

Getting Started with GrowthWheel

If you need help with segmentation, the first step is connecting with a GrowthWheel Advisor. Mark Johnson, the Executive Director of the Technology Innovation Center, is a Certified GrowthWheel® Business Advisor.

Once you have connected with an advisor, he/she will send you a 360 screening. After completing the screening, your GrowthWheel Advisor will recommend decision sheets to help guide decision making and create a 30-60-90 action plan that outlines the decisions and timeline.

Send us a message today to get started!

Succession Planning

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