Business owners face long odds when they try to successfully build a business. Moreover, once they get to a certain point where it is sustainable, the stress and hours may not be worth it to keep it going. Or perhaps it is simply time to retire and closing up shop is the best way to do this.
Here are three questions business owners need to ask themselves, as they contemplate what to do with the business.
- Is the business worth selling? The best option is selling the business for a fair price to a knowledgeable and enthusiastic new owner who is a family member, employee or someone who appears committed to carrying the company into the future. Perhaps it is a bigger company with more resources to enable the company to grow. However, it does not always work out that way. Some may be concerned about the next owner’s ability to continue the work started. Or, maybe it is not worth selling, and the owner decides to carry on for a few more years after this reality check. It can also be difficult to determine the value, which can vary as the market fluctuates seasonally or changes over a longer period.
- Is liquidating the best or only option? Some are lucky enough to sell, but others may be forced to liquidate. This can be because of bankruptcy, or to avoid bankruptcy. Consider donating some assets for a tax write off. Determine the value of the assets and work toward deals to meet those goals. Clean up and repair assets to get the best price. Remember that this is business – try to keep emotions in check during the process.
- What is the exit strategy? This can be a transition to new ownership, or the closing of the shop. The business is most owners’ biggest asset, so the transition needs to be handled carefully even when it is going to a partner, family member or employee. It is crucial to have accounting records, incorporation documents and intellectual property rights all up-to-date and in order.
Consult an attorney during this process
Smart business people have a lawyer they work with when they structure big deals, make large transactions and or draft agreements. Start a conversation with them about closing or selling the business early in the process.A lawyer can help clients avoid legal issues, bad decisions and mistakes by providing knowledgeable and steady guidance throughout the process.