Being prepared for a transition event is vital to meeting your needs for life after business. Knowing when you want to get out of business is important but more importantly is knowing how you get out of business is what will provide peace of mind. While there is no checklist to determine which is the best way, it is important to know there is various alternatives to consider well in advance of the event.
The first alternative is to sell your business. The buyers of your business can be external parties including financial buyers or strategic buyers. Each of these buyers has their investment parameters that can affect the value you are seeking for your business.
If external buyers are not a viable option, you may have the buyers already in your business. These buyers could be the current management team, or it could be your employees. These buyers typically are necessary for the business to have a smooth transition since they are one of the key business drivers of your business.
A second alternative is to transfer your business to family members or a charity. This family option is used in estate planning since family members have been working in the business. This allows for you to provide for a livelihood for your family, distribute your estate and continue the family business legacy. If the family option is not an alternative, you may wish to contribute your business to a charity that can fund causes for which you have an affinity. While selling the business and contributing the cash to a charity might be easier, it may not be viable.
A third alternative would be to hold on to your business when there may not be a suitable buyer for the business. While this may require your continued involvement in the business, the business can be structured to minimize that participation and provide you with the proceeds necessary to allow for your needs until the right buyer comes along.