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The Long Goodbye - Jan 5, 2010

Posted by: John Williams in Articles

You look at that business you have nurtured over so many years. You have given you blood, sweat and tears to make it successful. Now you look at the product of your work and realize that it is time to think about letting it go.

How do you do this? Who will take the same care of the business that you have given to it and will they follow your dreams for the business?

These are questions many small business owners must face when the time to let go sneaks up on them. For many companies, venture capitalists are not a real option. Owners sometimes are shocked to see what their company will look like and where many of these transactions will take their beloved enterprise. Others do not know how to approach such companies and whether they will get a fair price for their enterprise.

Other owners count on passing their company on to their heirs, often only to come to the realization that the heirs have no interest in running or even owning the company and have moved on with their own career and dreams. Where does a business owner turn?

Like any other good result, the sale of a company takes years of planning and work. Owners should identify acceptable exit plans and thoroughly investigate their assumptions in executing on those plans. Alternatives may include:

· The sale to an outside party (such as a venture capitalist)

· Inheritance of a family member

· Sale to a member of the management team.

· A competitor within the industry

· A supplier to the enterprise

Identifying an acceptable alternative is only the first step. A meeting of the minds should occur long before any final alternative is selected the candidate to own your company. The list of concerns is long and has nothing to do with due diligence at this point. Substantial agreement should be achieved on the following points:

What is the end result of the transaction (merger, joint venture, partnership, acquisition, etc.)?
How does each party get there?
Where will the company operate and be headquartered?
What type of market strategy will the company have going forward?
What will the management structure look like and how will it be staffed?
Where does each party want to take the company?
What types of valuation methods are acceptable to each party?

These and many other background questions must be answered and fully understood before the due diligence steps such, as collection of financial data should take place.

If you are struggling with these questions, or if you have not yet begun to address a viable exit strategy, please call me and let me help you work through these complicated issues.