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Robbinex > Succession Planning > Alternatives to Selling
We have spoken with thousands of business owners over four decades and have learned that many struggle over the decision whether to sell their business for many months, or even years, and often the decision is made for the wrong reasons.
For example, business owners often run into a problem they simply cannot solve, and decide to sell by default. When presented with a solution to the challenges they are struggling with, most will jump at the opportunity to fix the business rather than sell it.
We believe a business should be sold at the right time and for the right reasons. To guide business owners in this area, we developed our Phase One COSATA® (COmprehensive Strategic Analysis of Transition Alternatives).
Many business owners are simply not aware of the options for selling a business. Here are the fourteen most common alternatives:
Take the time to identify and fix the problem that is motivating you to exit. Take a fresh look at your business—something that is best done with a fresh pair of eyes, e.g. external resources. This may help you identify solutions or new perspectives that may allow you to prosper and keep your business longer.
Find a new bank, refinance your term loans, revisit your operating lines, remortgage your property or reschedule your debt repayment.
Where lack of financing may be forcing a decision to sell your business, there are “out of the box” instruments and sources of financing ranging from convertible debentures, preferred shares, leasing, factoring, participatory promissory notes, etc. that should be considered.
Remortgage your home or cottage, use some of your retirement savings, find a financial investor, a family member, a private equity firm or a venture capitalist. Additional financial strength can improve competitiveness and give your business a new lease on life.
While a strategic partner may also bring capital, there is much more emphasis on expertise or technology, access to clients, economies of scale, etc. Strategic partners often are prepared to take a long-term path to the total buyout. This may also help solve subsequent succession issues.
This is a looser arrangement than a strategic partnership, often of a contractual nature, without equity. Teaming up to take advantage of the other party’s knowledge, technology, market access, etc., can be useful and exciting.
Many times a son or daughter is willing and capable of both running and owning the business. Financing may be available and a properly defined and implemented mentoring program will ensure not only a successful transfer but also continuation of the family legacy.
A business may have grown beyond the owner’s ability to manage; hiring a manager may bring new skills and energy to address the challenges.
Often it is not necessary to reach outside the organization. Competent management may be found within the company, or a share of your work may be delegated to staff.
If you are in an unhappy or unproductive partnership, buying the partner out may be a better solution than selling the business. An external source of debt or equity financing may assist with the buyout. See the section on Partnership Issues
Surround yourself with people who have relevant experience and knowledge. Using the collective wisdom of an advisory board can be impactful: they may have already been through what you are going through, and have learned a few things in the process!
This may all of a sudden make your business much more viable. We have seen instances where two loss making businesses have merged to create a highly profitable business. Buying a competitor or near-competitor can help you acquire new clients, markets, product lines, location, technology, talented staff, etc.
Some business owners want to sell because they feel chained to their businesses 24/7. They are tired, listless, and hate the thought of going into work the next day. That is usually a strong indicator of burnout, a stage before a serious mental breakdown. Start by taking a few days off, or better still take a 7 to 10 day holiday! You may be amazed at two things:
Sometimes that includes a non-productive or money losing division of your business. That not only frees up capital, but it allows you to focus on activities that are more productive.
Obviously, each of the above options have pros and cons that should be considered carefully. Many M&A firms solution is to sell a business.
At Robbinex, our approach is very different: we insist on looking at all of the options, to ensure you are making….
… the right decision,
… … at the right time,
… … … for the right reasons.
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