Business owners decide to sell up for a range of reasons. Sometimes, financial necessity might force you into a sale. Sometimes, when you’ve built a business from the ground up, you might not have the skillset necessary to take it further. Sometimes, you might be looking for a new, fresh project to get excited about.
Whatever your reasons for selling your business, you’ll find that there are many different ways of making it happen. Lets take a look at a few of the more popular options.
Employee Buyout
Selling the business to its employees might hold a certain romantic appeal. Your employees are the people who are closest to the business, and might have a better understanding of its culture and idiosyncrasies than any outsider. What’s more, they’ll all have an additional incentive to ensure that the business performs well, since they’ll have a direct stake in it. When you pursue this option, there’s no need to disrupt the management structure – the changes are mostly technical.
Private Equity Purchasing
A private equity firm is an organisation that can purchase your business, either in whole or in part. If you retain a majority stake, then you’ll be able to retain control of the business as a whole. This is therefore a great option for those looking for investment from outsiders.
Management Buyout
A management buyout (or MBO) is a kind of employee buyout that’s limited to the management. This is usually contrasted against a management buy in, where another management team purchases the business and takes control of its day-to-day operations. Management buyouts are usually favoured by large conglomerates who need an exit strategy from smaller businesses they’ve acquired along the way.
Management buyouts have significant implications for the management themselves, who must bear much greater risk of incurring financial loss personally. While this is the case for employee buyouts of every kind, in the case of an MBO, the risk is concentrated on fewer heads.
Asset Sale
Rather than selling the business as a whole, an owner might elect to sell some of its assets. So, if there’s a premises that’s not performing as it ideally might, or a piece of machinery that’s surplus to requirements, you might cash in. Asset sales often incur income tax in a way that sales of stocks and shares do not, so make sure that you’re aware of the final bill before you commit.