Selling Your Business to Retire: Five Questions to Ask Yourself
When it’s time to retire, whether that is in the near future or 15+ years from now, what happens to your company when you do? Here are five questions to consider before selling your business to retire.
1) Can your company operate without you?
A business transition is most smooth when there are defined systems and processes in practice before the sale takes place. If your employees often come to you for instructions or check with you before progressing on a project, take time to clearly define business procedures so they know how to execute in your absence. If most of the knowledge about running your company lives inside the filing cabinet within your brain, it’s essential to start outlining that information in more formal ways leading up to a sale.
2) Who’s taking the wheel?
Maybe you have a rock star employee who can step into your shoes. Perhaps that person is a family member already working in the business, or maybe it’s someone you’ve hired over the years who has proven they have the chops to lead. If you’re scratching your head at who might be up to the job, consider whether you want to hire and groom that person before you engage a buyer, or if you are more comfortable with the buyer placing someone new at the helm.
3) What kind of transaction accomplishes what you want?
There are many directions your company can take on your road to retirement, and no two are exactly alike. Take some time to consider the best option based on what will satisfy your desires for the future and what will be best for your company. Maybe you are ready to sell the company outright, or conversely, want to retain a portion of ownership for yourself. Perhaps you want to explore an Employee Stock Ownership Plan (ESOP) or Management Buyout (MBO). It’s not necessarily a “one size fits all” decision— a flexible buyer (like Georgia Oak Partners) can often combine various transaction styles to reach an optimal structure for all involved.
4) How long do you want to stay involved?
Consider your wishes for your role immediately after the sale, and make sure they align with those of your buyer. A founder or family owner will often stay involved in some capacity after the sale to ensure a smooth transition, but the duration of that involvement can vary widely based on the situation. Do you want to stay in the day-to-day operations for a month, a year, two years? What exactly will be your job description during that time? All of this should be agreed upon with your buyer before the deal closes, but it’s good to spend some time before that conversation thinking about what is necessary for the business and what is compatible with your personal timeline.
5) Speaking of timeline—is now a good time?
Thinking seriously about retiring is often a function of your age and where you are in your life, but it’s important to consider where your business is in its own lifecycle as well. The state of your operations, trends in your revenue over the last 12 months, recent employee transitions, market shifts and various other factors all play into your company’s readiness for sale. You’ve probably heard the saying, “No one is ever truly ‘ready’ to be a parent.” The same logic often applies when choosing the right time to sell your business. Thorough preparation for a sale is prudent, but don’t let the quest for perfection be the enemy of the liquidity event. Making the leap can sometimes require pushing yourself outside of your comfort zone.