The article "Lost in Transition" in Entrepreneur (Nov. 2006) talked about how business owners should plan for s smooth transition of their business before the need arises. In other words, before you need to sell the business, you need to do some homework and planning well in advance.
What I found interesting is that most business owners don't have transition plans and that is very true for information consultants. According to the article, 52% of survey respondents had nonexistent transition plans. Only 9.8% had transition plans that were 90+% complete. And if you were going to transition a business, what might you transition it to?
- Continue to own, but not run it day-to-day
- Sell for top dollar to an outside buyer
- Sell out the the partner
- Sell out to a family member
- Sell to an employee
- Take the company public and continue to run it
- Take the company public and cash out
- Do nothing
If you own a consulting business (as many in the Consulting Section do), then you may immediately see options that don't apply to you. Many of us run one-person companies, so selling to an employee or partner is out of the question, for example. And while we might want to sell for top dollar, we are likely unsure of what is of value in our businesses.
With that all in mind, here are the tips from the article:
- Write down your wishes
- Start documenting (policies, procedures, etc.)
- Select and groom successors, if that is your intent
- Get a valuation – According to the article, 61%" were uncertain how companies in their industry were valued."
- Work out the finances
- Plan for change
A business broker (someone who helps an owner sell their business) could provide information on how to value your business and what strategies to take if you wanted to sell it. (Yes, selling a consulting business can be done.) If you are in the U.S., you might also talk to people at SCORE, Small Business Development Center, and Women Business Center in your community who may have information available on this for free.