Business Transition Strategies: Selling to a Third-Party

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This week, we’ll give a brief overview of one of the most common options for transitioning out of your business: selling to a third party. Keep checking in throughout March for more articles about exiting your business!

When you don’t have a family member or employee who is prepared to or interested in buying your company, it may be time to consider selling to a third party. 

Unfortunately, many business owners don’t realize the time, due diligence, and level of preparation that goes into completing the transaction. They try to rush through a process that takes, on average, 6-11 months. If the market isn’t favorable, that timeline can be extended indefinitely. 

Additionally, many business owners are taken by surprise when it comes time for negotiations, and the buyer doesn’t see the value that the seller sees. It can be frustrating, and cause you to put a hold on your future plans for after the transition. 

Before you decide on a third-party sale, ask yourself the following questions. 

If you answer “No” to more than two of them, it may be time to sit down with a business transition coach to look at your other options.

Should You Consider Selling to a Third Party?

  1. Do you work in a sector that is desirable at the moment? This would currently include industries like healthcare, ecommerce, web design, IT, and fitness/healthy living.
  2. Have you paid down most, if not all, of your business debt?
  3. Have you done your research and already have a third-party buyer in mind?
  4. Do you work with a broker or attorney who you’ve discussed the sale with?
  5. Are you prepared to continue working in your business for the next 6-12 months?
  6. Have you gathered all of your necessary documents, including leases, receipts, tax statements, income statements, vendor contracts, and the like?
  7. Are you prepared to possibly not receive all the cash at closing? If not, have you disclosed that you expect the full amount at the time of sale?
  8. Have you considered all other options, including selling internally and ESOPs?
  9. Have you had a discussion with a business coach or transition strategist?

Before you make your final decision, have a conversation with Lori Moen. Lori is focused on serving Small Business Owners – challenging them to get out of the weeds of working in their business to rise above and working “on” their business. She is skilled at challenging owners to look to their next act in life, post-business ownership. 

Get in touch with Catalyst Group ECR. With monthly or bi-monthly consultations, we work diligently to help our clients tackle their most pressing barriers to sale and largest obstacles to transitioning to the next phase of their lives.

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