I was meeting with two business owners several years ago. It was a family business and the husband and wife didn’t have any children working in the business.

“What are you going to do when you get ready to leave your business?” I asked.
“Just shut it down and close the doors.”
“But you’ve built a really strong income engine that produces a lot of free cash flow each year.”
“Yes, but it’s driven by our sales team which is led by us, and all of our sales are the result of long term relationships that we’ve built over the years. We don’t have long term contracts. Tomorrow’s sales depend on the buyer knowing us. That’s not something we can sell.” They were right. They didn’t have a business they could easily sell. They also didn’t have any family members that had been working in the business that they could transition to.

Is that the end of this true story? No of course it’s not. They had a strong business that was well-run and which produced a lot of income. But their sales were dependent on their relationship with their buyers. They didn’t have family in the business to allow for the typical succession.
Their buyers liked and trusted them and did business with them, not the company. The key then to any “sale or succession” was to transfer the relationship, not the business. The business would follow the relationships.

To do that they needed to find someone they could really trust, who was capable of running the business and, most importantly, capable of gaining the trust of the customers. That was not something that could be done overnight, but these business owners had considered this dilemma long before they planned to exit. They had the time to make this work.

Long Story Short

Long story short: The found an excellent prospective owner right in their own extended family. With proper incentives and time to allow him to build relationships with customers (in this case over 7 years), the succession transaction closed over a year ago now and has been a tremendous success for both the founders and the new owner.

Was this a succession or a sale? Actually, it was a combination of both. The owners had time and were willing to be flexible. The biggest single error that business owners make is waiting too long to plan an exit. All too often they hit a wall, burned out. When that happens they want out now and there is no longer time to build an exit strategy that is the best for them.
What are some of the hard facts? Many business owners have 80 to 90 percent of their net worth tied up in the business. They need to maximize what the net from a sale will provide in order for them to live the next phase of their lives the way they want. But…

Only 20 to 25 percent of the businesses that are put up for sale actually sell. If you spent 10, 20 or even 30 years building a business, you have way too much at stake to not carefully consider your exit years in advance of when you want to leave.

You are not done just because you decide to leave. There is no closure to your years of hard work. Sure, you can turn out the lights, lock the door and walk away. But is that the legacy of your business life that you want to leave behind? It doesn’t have to be.

Business owners can’t always choose whether their path is exit or succession or something else. Some businesses are difficult to sell because they are built on close relationships. Some businesses are job shops and have limited long term value. Some business don’t have family working in the business who are capable of taking over management and leadership. None of these obstacles are insurmountable, but they need flexibility and most of all, time, to overcome.

So if you think you can’t sell your business, think again. If you have the time – and the willingness – to plan a strategy, you can reap the financial rewards of your years of hard work, and transition your business to someone who will carry your mission and legacy into the future. Turn to your trusted advisors to help you understand your options, create the best plan, and work with you along the way.