Do Business Well

B. If one or more of your current employees is not a likely candidate for a buy-out, consider hiring your buyer. Begin an intensive search for an energetic, capable manager who could work toward ownership as part of his employment package. In this case, you could offer less pay than the individual might otherwise earn, but provide a certain percentage of ownership each year employed.

Another approach would be to find that talented individual who also has financial resources. The agreement might end up looking like a rent-to-buy. The manager would work his way toward running the entire operation over a two- or three-year period. When both parties were satisfied that the change in ownership and control could be smoothly transacted, the preset terms would be finalized.

In a variation of this idea, you could hire a partner. The future sole owner would initially purchase some amount up to, but not exceeding, 50 percent. When certain preconditions were satisfied the partner would have an option to purchase the balance.

C. Offer your business to a competitor or another company that could use your business as a line extension. This would be somewhat the reverse of the ideas. Of course, as mentioned there, you will be seeking top dollar for your operation.

It’s significantly better that someone in the industry come looking for you, than that you let it be known you are available for purchase. You may be able to accomplish this by taking a very high profile. Hire a local public relations agency to prepare volumes of press releases about your company. Subtly include the type of financial information that might whet a purchaser’s whistle. Start your own rumor among sales reps, trade magazines, and the known rumor mill about how successful your operation is. It may not normally be part of your personality to brag, but this is the time to do it.

If all this intrigue results in no progress toward a sale, and if you still believe your best chance of exacting a goodprice rests in finding an industry suitor, go to a broker. This situation, where you’re specifically targeting another player in the industry, is where a broker can do you a great deal of good.

The broker can make confidential inquiries on your behalf. He’ll usually begin by calling possible buyers and asking them in a very general way whether they have interest in an acquisition. Depending on their interest level, the agent will increasingly expose information about what and who. However, these discussions will be held only at the highest levels, and with confidentiality agreements signed by all who are “in the know.”

If the situation gets serious enough to warrant a visit to your facilities, this too will be prepared in such a way that your employees will have no idea the people taking the tour are potentially their future bosses.

Having an advocate in this situation will generally result in a larger purchase price. The buyer will perceive the broker to be an expert in valuation, and he will provide them with backup to prove the worth of the deal to the buyer.

D. If you’re unable to strike a deal using any of the above methods, you’ll next want to compare the value of your business in an open market situation to its liquidation value. Only the rare very small business will have a large liquidation value. There is also the possibility of partial liquidation and partial sale.

Liquidation means selling off all the assets and paying all the liabilities. The net result is yours to take home. (Minus any taxes Uncle Sam may extract.)

If you own a machine shop, you may do better in liquidation. Depending on the value of your equipment in the used market, you may be able to net more from selling it than you can from selling the going concern.

At the other extreme, a well-located trophy shop may have very little liquidation value, but the value of the ongoing business may be much higher than you think.

When all the above has been exhausted, and you clearly need to sell, find a broker through your lawyer, CPA, banker, or other trusted business acquaintance, and pursue the general population.

9. Concurrent with step eight, you’ll want to arrive at a valuation for your business. What is your asking price? What are you willing to accept? What kind of terms are optimum from the standpoint of security and tax?

Your company is worth some combination of its asset value and its earning power. The following numbers will provide you with a good idea of what you should be able to ask.

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Serious Selling Your Business part 2

• Some Franchise Terminology
• Is a franchise the optimal solution? From the prospective franchisor's viewpoint
• Selling the Franchise
• Preparations for franchising
• Investing in a franchise: Take it slow
• Franchisee Selection Tips
• Is a franchise the optimal solution? From the prospective franchisee's viewpoint
• Mutual Expectations (franchisees) part 1
• Franchising Advantages
• Relationship Franchise Agreement - Operations Manual
• Business format franchise

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