Top Tips When Selling a Business to Family, Friends of Staff
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Many business owners know the best buyer for their business, but run the risk of ruining their relationships in negotiating the busines sale themselves. Here are some thoughts on how to manage the sale of your business smoothly and simply.
Combine money and emotions and you setting the scene for the perfect storm.
It can be very satisfying selling your business to someone that you know and trust, such as a family member, a friend, or former staff. Imagining this scenario may seem like the perfect solution when you are ready to exit your business. It may present a simple, hassle-free option to what may seem to be an otherwise complicated process of having to you’re your business on the open market.
While there are plenty of positives to talk about, the reality can unfortunately be quite different.
Any transaction, such as that of the sale of a business, involves at least two parties, each of whom want what the other party has. In the case of selling a business, one party owns the business and wants the other party’s money for it. At the same time, the other party has the money and wants the business. Both parties want what is best for them - bearing in mind that most people want what is fair and equitable; that is, a win-win situation.
Herein lies a potential major problem. One person's perception of what is fair and equitable is often different to another’s. It gets even more complicated when the transaction in question includes many components such as the value of stock on hand, the value of existing contracts, work in progress etc. This multi component type of transaction is the norm when selling a business, - and, it’s one of the biggest causes of arguments and disagreements between sellers and buyers.
To add to the mix, there are the non-financial components of the business which have to be agreed upon. Things like what is included in the sale price or what can be expected in future performance, or staff stability. These items can cause significant issues to develop between the parties on either side of the deal, especially if the process is not managed independently.
So the question becomes: what value do you put on relationships with family, friends or staff? To sell to those you know may well turn out to be best solution. But, what if the opposite was actually the case? What if there was a high chance that in order to agree on a deal, you had to make some tough decisions, or take a strong stance? How would that impact on your relationships?
As a result of the emotional bond, the connection we have with family, friends or our staff, the business sale process can actually be a lot more difficult than if dealing with a stranger. That’s why the safest, cleanest option is to create independence by turning to a third-party. An intermediary who can handle the challenges and can ensure the personal attributes are taken out of the transaction. An experienced business broker.
As an added benefit, an independent party, such as a reliable business broker, could expose the opportunity to non-related parties, who may be willing to pay more than you were asking for from the ones you know.
An experienced business broker will help you to sell your business to close friends, staff or colleagues whilst retaining a good relationship. A business broker acts as a “buffer” between the parties and uses their experience to diplomatically and property manage the business sale process.
For further help and advice on selling your business to family, friends or staff, contact a member of the Benchmark Business Sales team today.
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