Planning to transition your private business to a successor takes time and intentional perseverance. It takes time to clearly set the goals for your transition, time to paint a picture of the life you want to live after you leave your company, and time for your successor to learn to lead. Transitioning your company is a journey that is done with purpose rather than a “one-and-done” transaction, especially when you put people-first and your vision is to have a family member, business partner(s) or key employee(s) to successfully carry on your legacy. What happens if, at any time during or before your journey, you receive an offer to buy your company: Is it an offer you can refuse?
The Key to Clarity and Confidence: Establishing the Points on Your Compass
The best place to begin to figure out your answer is also the best place to start your transition journey: your vision of a successful transition. In other words, when the transition is complete:
- Are your relationships intact?
- Are you living a meaningful life?
- Is your future financially secure?
- Is your company in the competent hands of the successor you’ve chosen to lead it?
To help create that vision, we ask you to answer six questions, the answers to which create the six points on your Transition Compass.
Why: Why are you driven to transition your business to successors?
What: What will you sell or transfer: the entire company or parts of it?
Who: Who do you want to succeed you in leadership: a partner, key employee, family member or third party?
When: When will you begin the transition of your company and when do want to complete it?
How Much: How much money do you want for your equity, to live your Next Adventure, and how much can your company afford to pay you?
How: How will you transfer ownership: via a sale, gift, or some combination?
If you can only answer a few of these questions as you begin to think about transitioning out of your company, that’s normal. As we begin to develop your Transition Roadmap, the points will come into focus and your Compass will guide your steps on the journey to your transition destination.
All Options Are on The Table Until You Remove Them.
Take That Call – If a potential buyer is serious, there is no harm in learning the details of its offer. In fact, knowing the details is the key factor to deciding whether to accept or refuse the offer.
Grab your Compass – One, by one, look at how a sale proposal lines up with the six points you’ve set on your Compass.
For example, if your Who Compass point is the child who has worked in the business for years to prepare for being its future owner, the third-party offer is not one you would accept.
If the terms of the potential buyers offer aligns with five of your six Compass points, what then? Let’s say that the buyer wants to take over within the next six months, and your When Compass point is years away. We’ll explore this issue and ask you to project yourself into the future. Will you look back in regret? What is the risk? Are you and the buyer willing to negotiate the timing of the transaction or your role in the company after its sale?
Give your answer – If you receive an offer from a third party before or during your transition journey, you determine how well the terms of the offer line up with the six points on your Compass. If your points and the offer do not align and/or are not negotiable, you have your answer: “Thanks, maybe some other time.”
Use Your Compass to Stay Focused
It’s natural to be distracted by a third-party offer. As guides who have helped other owners focus on what’s important to them, we can help you:
- Sort through your exit options using an organized process, no matter who you want to succeed you in ownership.
- Confidently navigate obstacles and dilemmas—like whether to accept an offer from a third party.
- Identify which objectives are most important to you so you can keep your eye on your prize: the transition you want for yourself, your family, successor, and business.