Insights: Mike Thompson on business exit strategies
Selling a business isn’t like selling a car or condominium. There are many complex factors to consider in achieving retirement goals and ensuring the sustainability of the business for employees and the next generation of management.
School of Business Prof. Mike Thompson helps business owners assess and select the best transition pathways to take to safely navigate the perilous exit/succession landscape.
Here are the five potential pathways that will ensure you get the most out of your business transition. Bottom line, the sooner business owners start thinking about this the better.
Do nothing and pray
You can do nothing except hope and say a few Hail Marys but that isn’t going to help you in the long run. This “deer in the headlights” approach can lead to either a forced or voluntary wind down which is in nobody’s interest.
Look around you – is there someone in your family or current staff team that is well positioned to carry on the business? Receipt of the sale proceeds may be lower and/or deferred, but knowing the buyer well can often minimize unexpected surprises.
Look a little further. Are there opportunities to find an external buyer who is interested in acquiring the company for their own strategic or financial reasons? There may also be opportunities for mergers or strategic partnerships.
Grow and then sell
This is an opportunity to take a strategic step back as you groom upcoming talent to lead the business. Build your bench strength through internal promotions or new hires to ensure there is a logical succession process in place. This approach ensures continued revenue growth while letting someone else take the lead under your guidance.
Harvest and then sell
Make the most of the enterprise’s cash generation capacity before you actually sell the business by harvesting cash through dividends and/or the sale of non-core assets (such as real estate).