As they approach retirement, many business owners face a difficult decision. How do they monetise their investment in a business they have spent a lifetime building? To do this, while also balancing the best interests of family and loyal staff, can present quite a problem. Little wonder that many owners choose to leave this problem for another day while they get on with resolving more urgent issues in their business. But succession cannot be deferred indefinitely.
It is also worth acknowledging the emotional hurdle inherent in facing any decision around succession or sale of the business. To most business owners, the business has been their primary focus of attention for many years. There has been blood, sweat and tears shed over an extended period in building the company to what it is today. The thought of peeling yourself away from this can be very confronting. It can also be challenging to conceive of what will fill the void in the absence of such focus on the business.
Possible solutions
Options are available to business owners trying to solve the succession question, some of which are listed here, but not all of them provide answers to all the critical aspects.
1. Transfer to family
While this is often a dream for many family business owners, it can be difficult to implement in practice. How do you monetise your own wealth? Family members are frequently not in a position to pay you what the business is worth. Are your children ready to run the business? Do they want to take on the responsibility of running the company? Do they really have the appropriate skills to take the company forward? Although the concept of building a dynasty for your family is appealing, the reality may often be very different.
2. Sell the business to employees
Selling the business to loyal employees may also seem like a good outcome. However, a few key questions need to be answered. Is there someone ready and capable to take the helm? Not all good employees make great leaders. Can the employees raise the money necessary to fund the acquisition? If you’re forced to contemplate taking an earn-out over time, do you want to take this risk and does this suit your personal requirements?
