So many of our business-owner clients build their exit strategy around selling their business to an independent third party. They think that they’ll obtain more cash from a third party and that the sale will be less risky. Often, they are completely wrong.
Third Party Sales Can Be Risky.
Of course, if you can get your price from an outsider and payment in full in cash at the closing, and if you have no time to make a carefully structured sale to an insider, then the third-party sale is the less-risky choice.
Many Companies Aren’t Appropriate For All-Cash Sales.
To be a good candidate for an all-cash sale, your company must:
- have more than $1 million (or even $2 million) in EBITDA;
- be in a attractive market sector;
- have strong fundamentals; and
- enjoy a unique competitive advantage;
Otherwise, you just aren’t a likely candidate for a sale to a third party, and it won’t be reasonable to expect cash.
It Can Be Hard To Find a Third-Party Buyer.
Every sale requires a buyer. We’re in the middle of a tough time for business, so unless your company is in an attractive market sector, such as power, alternative energy, health care, medical services, or healthy-living products, prospective buyers will be in short supply. These days if your in the business of construction, retail, real estate, automotive, or consumer products you may will find it impossible to attract an outside buyer.
The Longer Your Wait, The Riskier It Gets.
What will you do if:
- A qualified buyer doesn’t show up?
- What happens if,
– your industry niche has fallen out of favor; or
– your sales drop of; or
– the economy is in decline or worse?
A Carefully Structured Insider Sale Puts You In Control
- Choose your buyer;
- Name your price;
- Control ownership until you are paid in full; and ,
- Shift the responsibility for performance to someone else.
Do Take Time To Plan
Selling your business to someone inside the business takes some work, some time and careful planning. Although insiders may not have the ready cash right now, you can still sell profitably when:
- your company has a good management team
- your company has good cash flow; and,
- you allow plenty of time before leaving to make your exit plan work.
Work With Experts
The best exit strategies are implemented with the help of a knowledgeable attorney and an informed accountant. As soon as you start your business, you should be planning your successful exit. Let Shoffner & Associates show you how to do it right.