Current data shows a positive outlook for small business owners. The NFIC small business hiring data shows that almost 30% of small businesses need to fill positions. Job creation is a sure sign that a business is doing well and that the owner feels optimistic about their business.
However, not all small businesses are doing well. Regardless of how well the economy performs, things can get tough for small businesses. As a small business owner, you need to have a detailed exit strategy in case you find yourself in a difficult situation.
The median time to sell has declined between 2012 and 2014. Data from BizBuySell shows that the median time to sell went from 200 days during Q2 2012 to 153 days during Q4 2014. This is the lowest median time to sell ever recorded since BizBuiSell started compiling this data in 2007!
However, 5 months can be too long. If you are dealing with a personal event, have found a new opportunity, or can't keep up with the marketplace, you need to sell faster.
In an ideal scenario, a small business owner would get ready to sell their business months or years in advance. You might not have much time to sell your business if you run into a difficult situation, which is why you should consider other transition strategies:
- Contact potential buyers. You can probably think of a few people in your professional network who might be interested in your small business. Adopt a proactive attitude and reach out to these people instead of waiting for potential buyers to show interest.
Being proactive and contacting potential buyers can help you sell your small business faster. The downside is that you will have to put yourself in a vulnerable situation since competitors might find out about your plans. You can reduce your risks by choosing a trustworthy and experience intermediary who will communicate with potential buyers while making sure that confidentiality is respected.
- Think about getting help from a business partner. Your exit strategy does not necessarily have to include selling your business. Having a partner come on board is ideal if you need more free time, whether it is for personal or professional reasons.
This is an option you should explore if your business is growing and generates a profit. Look for a partner who is willing to manage the aspects of the business that you would like to remove yourself from. Ideally, your business partner should bring new skills to the table. You need to create an agreement that goes over what your role and what your partner's role is, and what will happen once you decide to completely remove yourself from the business.
- Selling the business to your employees can be a viable option. This is a satisfying way to exit your business and your decision won't affect employees in a negative manner. Employee ownership allows you to reward the individuals who have been loyal for years. There is a good chance that your small business will continue thriving thanks to the experience and dedication of the employees. Keep in mind that this strategy is viable if the business is stable and if you have had a fairly low employee turnover.
In most cases, business owners create an Employee Stock Ownership Plan or ESOP to transfer ownership to the employees. There are tax benefits associated with this solution and this is a flexible way to orchestrate the transition since the owner can remain involved. You should get help from an attorney or from your accountant to determine how an ESOP would work in your situation.
- Make your offer more attractive. You need to offer some incentives to sell your small business. A qualified buyer will be more likely to purchase your business if they see some clear advantages.
A lot of business owners are able to sell quickly by asking for a low price. You can add other incentives to make your offer more attractive, such as providing training, offering seller financing or adding assets like your equipment to the sale.
- Look into liquidating your assets. Liquidation should not be the first exit solution you look at, but this can be a good way to get out of a business that is no longer profitable and difficult to sell. Live industrial auction sites make liquidation of assets easy. Liquidation makes sense if you need a fast exit strategy.
Keep in mind that liquidation means you won't be compensated for intangible aspects of your business, such as the brand recognition and the customer base you have established. Selling real estate and equipment is easy, but selling your inventory might be more complicated. The best way to sell your merchandise is probably to have a liquidation sale and to offer extremely low prices.
You never know when you might need to exit your small business. Your personal circumstances could change overnight, or you might come across a better career opportunity. It is best to have an exit strategy in mind in case you ever find yourself in this situation. An immediate departure will be a lot easier if you have already taken the time to compare your options and know what the most viable strategy is ahead of time.