Important tips for selling your business to family, friends or staff

Many business owners know the best buyer for their business, but run the risk of ruining their relationships in negotiating the business sale themselves. Here are some thoughts on how to manage the sale of your business smoothly and simply.

It can be very satisfying selling your business to someone that you know and trust, such as a family member, a friend, or former staff. Imagining this scenario may seem like the perfect solution when you are ready to exit your business. It may present a simple, hassle-free option to what may seem to be an otherwise complicated process of having to put your business on the open market.

While there are plenty of positives to talk about, the reality can unfortunately be quite different.

Any transaction, such as that of the sale of a business, involves at least two parties, each of whom want what the other party has. In the case of selling a business, one party owns the business and wants the other party’s money for it. Both parties want what is best for them – a win-win situation. 

Herein lies a potential major problem. One person’s perception of what is fair and equitable is often different to another’s. It gets even more complicated when the transaction in question includes many components such as the value of stock on hand, the value of existing contracts, work in progress, etc. This is one of the biggest causes of arguments and disagreements between sellers and buyers. 

Bruce Coudrey is principal of Benchmark Business Sales & Valuations.

To add to the mix, there are the non-financial components of the business which have to be agreed upon. These can cause significant issues to develop between the parties on either side of the deal, especially if the process is not managed independently.

So the question becomes: what value do you put on relationships with family, friends or staff? To sell to those you know may well turn out to be the best solution. But, what if the opposite was actually the case?

As a result of the emotional bond, the connection we have with family, friends or our staff, the business sale process can actually be a lot more difficult than if dealing with a stranger. That’s why the safest, cleanest option is to create independence by turning to a third-party.  An intermediary who can handle the challenges and can ensure the personal attributes are taken out of the transaction. An experienced business broker. 

As an added benefit, an independent party, such as a reliable business broker, could expose the opportunity to non-related parties, who may be willing to pay more than you were asking for from the ones you know. 

An experienced business broker will help you to sell your business to close friends, staff or colleagues whilst retaining a good relationship. A business broker acts as a “buffer” between the parties and uses their experience to diplomatically and properly manage the business sale process.

For more information, visit the Benchmark Business website or call 1300 366 521.

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