Some day you and your business will part company. Based on our Spirited Leaders’ experience, it appears about 2/3 of small-business owners do not realize some day they and their business will part company. While that sounds absurd, it is a reality in the small-business sector.

So, it is worth repeating: some day you and your business will part company.

Warning: harsh news to follow.

When you and your business part company you may not be aware of it…you may have succumbed to some illness and your business is no longer a priority in your mind. That happens from time to time…especially when the owner of the small business has avoided succession planning for 60 or more years.

That of course, does not have to happen. Some people experience an alternative exit…they decide why, when, and how they will exit and they create plans and perform actions that cause a smooth exit. This smooth exit involves a realization of the value embedded in their business. Money is transferred from the business bank to the owner`s personal bank…or to some other vehicle designed to minimize taxes, maximize usable money, and satisfy the needs of people.

The value embedded in the business is realized and money is transferred to the owner when the owner sells some or all of his or her ownership shares.

Beyond the money, there are many reasons why an owner may want to sell some or all of his or her ownership shares. And, there are many ways to accomplish the sale of ownership.

Two considerations to keep in mind as you grow the value in your business are WHY? and HOW?

WHY?

Why would an owner sell some or all of his or her ownership shares?

Here is a sampling of reasons why an owner might sell some or all ownership shares…

The key message is: there are good reasons to sell ownership and there are bad reasons. Here, good means higher selling price while bad means lower selling price. Higher selling price means higher return on time and effort invested; lower selling price means lower return on time and effort invested.

Of course, the amount of money received by the owner who sells shares is not the only consideration.

The other major considerations can be summed up in four words – the impact on people. This includes the impact the sale of shares will have on:

• you, the seller…is the seller comfortable and will that comfort last?
• your family…is your family comfortable and will that comfort last?
• the buyer…is the buyer comfortable and will that comfort last?
• your fellow shareholders…are they comfortable and will that comfort last?
• your employees…are they comfortable and will that comfort last?
• your clients…are they comfortable and will that comfort last?
• your suppliers…are they comfortable and will that comfort last?
• your community…are the people in the community comfortable and will that comfort last?

For many of these people, comfort will be tied to money considerations…not just direct money but indirect money. Comfort will be tied to a range of indirect-money considerations like, Will I keep my job?  Comfort will be tied to interpersonal relationship issues like, What will this place be like when the new owner injects his or her ideas? Numerous other considerations will be in the minds of the stakeholders affected by the sale of ownership:

• How will the new owner change the business?
• When the new ownership is in place, will policies change?
• Will payments to suppliers be affected?
• Will product quality suffer?
• Will the new owner close the place down and move production to the U.S.?
• Why wasn`t I given the chance to buy those shares?

Most people tend to worry when change happens. Some of these worries are beyond the control of the person who is selling ownership shares. On the other hand, some of these worries can be alleviated if the person selling the shares wishes to do that. Succession planning and communication provide the opportunity to maximize people`s comfort levels.

Succession planning and communication: the processes that maximize both money for the person selling ownership shares and people`s comfort levels. That would be the Ideal Scenario.

The Ideal Scenario:

• the person selling the ownership shares receives maximum money
• the person selling the ownership shares is comfortable
• the person buying the ownership shares feels the money spent is a good investment
• the business continues delivering value to all stakeholders
• all stakeholders are comfortable with the change and future prospects

As you create your succession plan, consider these things and assess how important each is to you. Consider your needs to be the highest priority: ensure your money needs are satisfied and ensure you are comfortable with the changes that will follow. Consider the needs of others.

Perhaps, you will rank other people`s needs in the following order:

1. the needs of your family
2. the needs of your fellow shareholders or partners
3. the needs of the buyer
4. the needs of your employees
5. the needs of your clients and suppliers
6. the needs of the people in your community

Perhaps, you will choose to plan ways to satisfy your needs and all of those other people`s needs. That would be the Ideal Scenario.

HOW?

How would you do that?

How would you satisfy all those needs? It will take time and much thought to figure out the best answers. The right approach is to start by considering your needs. One of those needs is maximizing the amount of money you receive when you sell ownership shares.

How do you do that?

In summary, you maximize the amount of money you receive by:

1. Creating a plan to build value in your business
2. Executing that plan, creating a track record of success….this means: having the right people in the right roles doing the right things and having top-notch processes to ensure scalability and transfer
3. Creating a succession plan and working it so: people on your team know what success feels like, people on your team are groomed and able to take on increased responsibilities, and you are replaceable
4. Nurturing buyers
5. Knowing the value of your business
6. Knowing the minimum price you will accept
7. Being prepared and ready to sell when buyers want to buy

To whom might you sell your ownership shares?

Let`s assume you want to exit the business and sell all of your ownership shares. You might sell your ownership shares to:

1. A financial buyer – a person who views your business as a good stand-alone investment
2. A strategic buyer – a person who wants to gain advantage by meshing certain aspects of your business with other investments
3. A family member who has been groomed to succeed you
4. A family trust or holding company
5. A fellow shareholder or business partner
6. One or more of your employees
7. A local competitor
8. The public...i.e., go public by making a public offering
9. Other creative options

Or, you might sell the assets in your business and shut the business down.

While it is natural to want to keep your options open, to maximize the money you receive when you exit you will need to reduce the above list to 2 or 3 possibilities. This is essential because – to maximize the proceeds from the sale you will want to strategize then take actions and the best strategies and best actions will differ depending on the target buyer. Some of the options will not apply – for example, if you do not have a family business then you can take the family-business options off the list. On the other hand, if you do have a family business then you must give the family-business options your best thoughts…before you decide to remove them from the list or decide to keep them on the list.