You’ve seen your business grow and prosper due to your hard work and careful planning, so you’ll care about what happens to it after you sell it. Two of the main options are to pass it on to family or employees.
If you’ve spent years working with family in the business, you’ve probably got a very good idea of who your successor will be. They should be someone who’s in it for the long haul, who has a genuine interest in seeing the business continue to grow and flourish. They should be respected by other employees, who recognise them as your logical successor.
If you can sell it to a trusted employee, they’re more likely to maintain the existing company culture and run the business in a manner similar to you have, especially if they’ve been with you for a long time.
Either way, passing your business on to family or employees comes with an extended hand-over period during which they shadow you to learn every element of the business’s day-to-day running, learning what they don’t already know.
Selling to family is often more stressful and takes longer than selling to a third party, as it has more emotional decision making and the dynamic of who in the family misses out. Making sure all the boxes are ticked legally prevents any disagreements further down the track. It’s no surprise that some of the biggest disputes in business are between family members.
Consult with your lawyers and accountants and treat the sale like any business transaction. Make sure that you:
It’s essential that all parties are clear on how the sale will be structured. Misunderstandings can lead to on-going disputes.
The advantage of selling to employees is that they already know your business, and if you offer them the chance to buy it, that’s a whole lot of time you don’t have to spend praising its virtues. You’ll experience a smoother transition, because the other employees, suppliers and customers will already know the new owner. It also means you might not have to stay around for as long as you would if you were selling to someone outside the business, because the new owner won’t need to be trained as extensively.
In most cases, selling your business to an employee will follow a common path. The steps usually include:
Each stage of the process should be overseen by professionals such as your accountant, lawyer and the bank.
Whether you’re selling to family or employees, it’s essential to train them well in advance, so that the process of them stepping up and you stepping down goes as smoothly as possible.
Your first task is to document everything, so that the new owner can run the business without you. Create manuals that outline all your operating processes.
Then work through the following steps:
As you’ll see, this process works by gradually easing you out, as they ease in. Following these steps is essential for successfully delegating control. Handing over the reins in one fell swoop almost never works, as the new owner is left feeling overwhelmed and without the necessary skills, while you walk away from the business knowing you’ve left it in the control of someone who doesn’t know what they’re doing. It’s not the kind of legacy you want to leave behind.
Delegating control and then letting go of the reins entirely is especially important when selling to family or employees. Put together a transition team who’ll help you transfer control. They should be people who are not emotionally involved, like your accountant, lawyer, or business broker. Maintain open communication with your team and your successors.
POSTED IN: Day to Day Banking,2017,Succession