You’ve run your business for thirty years and now it’s time for you to leave. You speak with a business broker and find out that there really isn’t a market for your business. What do you do?
If you’ve waited thirty years to think or start working on this problem you might have very limited choices. If you’re in your 60’s and you haven’t started thinking about this issue there might be only two options: You can keep running the business or you can close it down.
If instead you start thinking about this in your 50’s there will be options. If you’ve built a successful business and you’re young enough you can develop options that work for you.
If your business is not one that’s saleable you should know that well before you plan to leave. If you think your business is not one that’s easily sold here are seven things that you should consider while you’re in your 50’s:
- Recruit and train someone to take over your business from you. A business that is running has value. It might be a key person is the only one who would see that value, but you can get at least some money from a key person who will take your business over.
- Make sure you fund your retirement plan at as high a level as you can afford. I call this pre-funding a retirement plan. Those who do this will have options that allow them to pursue a wind down strategy.
- Pursue a wind-down strategy. This is where you give away the vast majority of your customers to a younger person. You keep the customers that you enjoy working with and provide a high amount of revenue. In many smaller businesses the owner can work with a limited amount of people well into their 70’s.
- Find a business to merge with that would create enough size that it could be sold. This is a challenging strategy. If you find that your business is too small to be sold and can find someone in the same situation you might be able to merge your businesses together to get enough scale that a buyer would be interested in.
- Look at doing an ESOP. (Employee Stock Ownership Plan) For some, their business might be a large one (like construction companies) but no one really wants to buy it at a fair price. If you have the correct management and employee relations structure an ESOP might make sense.
- Grow your business. This sounds like an obvious choice, but if you know that your business is not large enough to interest a buyer put together a plan to grow your business so a buyer would be interested.
- Have a business process that is saleable. Even if you have a small business and you develop a business process or product that has patents involved you might find a buyer at the end of the road. This is difficult without having a business with size, but in some instances buyers might want to buy your intellectual capital and if your IC is good enough you could find someone wants to pay you a significant amount of money for your intellectual property.
The key with knowing you have a business that is not attractive to outside buyers is to take action sooner than later. Working on this problem while you’re in your 50’s will often allow you time to find a great solution. If you wait till just before you want to retire, you’ll likely have challenges leaving your business.
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