Most business owners face the dilemma of deciding when to sell. The answer is not simple.
Obviously, selling at the right or best time is deal. But how can you determine that "best time?" In addition, maybe you should sell a minority interest to employees (e.g. ESOP) or private equity group (PEG), rather than the entire firm.
The Mentor Group is asked these questions nearly every day. We suggest the following steps as a means to the answer(s). Presumably, outside advisors should provide the needed guidance and specifics.
- Assess the firm's known and unknown strengths and weaknesses
- Address the family dynamics, such as each party's short and long term interests
- Ensure that the business structure and shareholder agreements allow for the appropriate buyer (even if sold within the family)
- Establish governance from management/board of directors apart from non-family stakeholders
- Evaluate and guide the promotion process to install a well-functioning, deep management team
- Refocus the business to the most profitable markets
- Implement appropriate systems, record keeping, and cost controls
- Protect intellectual property (IP) via legal documentation
- Determine that adequate capital is available for current needs and capital expenditures
- Analyze wealth transfers/tax planning and the consequences of a transaction
- Develop baseline value of business at beginning and value created upon a transaction