Selling A Business - Three Less Common Approaches

Common strategies for selling a business involve listing with a business broker, talking to competitors who might want to expand, and posting for sale by owner ads. All of these can be successful, but before a business owner who is ready to retire actually begins the selling process, it’s a good idea to know all of the options. They include three approaches not usually considered.

1. ESOP: The business owner with several employees and a few years to plan head before selling might consider the idea of developing an Employee Stock Option Program. Usually set up by an attorney and administered by a bank, an ESOP enables the employees to have some of their wages and salaries set aside into a fund that will be used to buy out the out the owner at a specified date in the future--usually five years or more. Among the advantages is that the seller doesn’t worry about having to market the company, the buyers are knowledgeable about the business, and there’s no question about how to raise the money for the purchase. As they will own the company one day, employees in this arrangement should be counseled to agree on the rights and responsibilities in the newly-purchased business long before it actually changes hands.

2. All in the family: The tradition of a retiring owner turning the company over to children, grandchildren, or nieces and nephews is barely practiced anymore, as those in the younger generation rarely have an interest in their “family’s business.”  Until recently. It now appears to be gaining popularity as a method for selling a business, as those currently trying to join the labor force are finding that good jobs are not as easy to get as they were just a few years ago. The solution might be for one or more family members to buy out an older relative and take over a business. In some cases, it’s not a good idea to mix business into family relations. The result can be harmful to connections between relatives. But if all of the details of the deal are spelled out in a contract, and the parties agree beforehand not to let business problems interfere with familial relationships (sometimes easier said than done), keeping the enterprise in the family might be a good way to solve the father’s desire to sell, and the need of the children to find work.

3. Outplacement organization: The job of helping laid off employees find new work is often assigned to outplacement companies or outplacement departments in companies that are terminating some of their employees. And although the focus is usually on matching those in the job market with openings in other organizations, there’s no reason that the more enterprising of the people seeking employment can’t be introduced to promising business opportunities. This plan for selling a business with help from an outplacement office involves providing a packet of information about the business and terms of the sale to those who counsel newly-unemployed. No, self-employment isn’t for everyone, but it is an option for those looking for a job. And outplacement professionals can be a good resource of potential buyers.

About The Author:  Peter Siegel, MBA is the Founder and President of BizBen.com. Mr Siegel has provided assistance since 1994 to business owners, business brokers and agents on how to sell small businesses in the California marketplace via the BizBen Network of business buyers. He can be reached directly at 866-270-6278 to discuss the best strategies for selling California small businesses.

Posted on March 30, 2011  |   Email This Blog Post   |   Print This Blog Post   |  All Contributions From Peter Siegel, MBA