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Business Broker Report 14: What Do I Do After I Sell My Business?

Posted on Tue, May 27, 2014

man sailing after he sold his businessQuick answer: anything you damn well please!  Sail around the world. Train for a triathlon. Find the perfect trout stream. Play golf every day.

 

Sounds great, but reality is a little more complicated. You can’t just walk out the door the day after you sell your business – and most owners don’t want to. They understand that in order to protect their employees and the legacy of what they have built, they will have to stick around for a bit. That being said, some owners still want to exit as quickly as they can; others would like to continue to work for a few years, although with reduced hours and responsibilities. Some owners might want to retain a piece of the business and cash in on the upside that the buyer creates. The right Business Broker / Advisor can help structure your post-closing arrangements as part of the overall deal and create a situation that works for both you and the buyer.

Although post-closing arrangements are custom-tailored to individual needs, they fall broadly into three categories:

1. Short-Term Transitional Services

Sellers who want to exit quickly should understand that they will need to stay a minimum of 2-3 months after closing to train and familiarize the new owners with all aspects of the business. This includes introducing the buyers to your employees, familiarizing them with your operational procedures and transitioning client relationships. Often in this type of arrangement, your responsibility is full-time for the first month or two, and then reduces to part time. These arrangements typically include a consulting component where you agree to be available for a period of up to one year after closing for occasional telephone, email or in-person consulting. Short-term transitional services are traditionally provided as part of the larger deal, with no additional compensation.

2. Longer-Term Employment

Sellers who would like to stay with their company for more than a few months can have a strong hand in influencing what their post-closing situation will be. Oftentimes we can arrange that the seller limits his duties going forward to the things he likes (sales for example) and avoid the things he dislikes (administration or HR). We can also often arrange for changes in his work schedule to improve his quality of life – shorter work weeks, more vacation time, etc. While these post-closing employment arrangements often have a term of between 6 months and 2 years, we have seen cases where it worked so well that the seller stayed on for 5 years. 

3. Retaining an Equity Position

Buyers can bring more to the table than just the cash needed to consummate a deal. Buyers often bring professional management, additional capital to help the company grow, or other critical elements (such as new distribution channels) needed to take a company to the “next level”. It might be a good business decision in these instances for the seller to retain a minority interest in the company.  The seller would then continue working for a period of time and use the assets the buyer brought to the table to help the buyer grow the business. At some point in the future, the seller elects for the buyer to buy his remaining equity at a pre-determined formula, which, if all goes well, gives him a higher valuation and allows him to participate in the growth that has occurred since he sold his majority interest.

 For more information about issues that relate to selling your business, please visit us at www.primeinvestments.us. There are lots of white papers to download and blog topics of interest to business owners. If you would like to have a confidential discussion about your personal situation, click here or on the link below or call us at 240 290-5000. We’ll be happy to schedule a free initial consultation and complimentary business appraisal.

 There’s never an up-front cost or obligation, and all communications will be held in the strictest confidence.

 Schedule Your No-Fee Initial Consultation

Prime Investments Business Brokers takes the risk out of selling. For over 25 years Prime has been helping business owners in Florida, Georgia, Virginia, Maryland, Pennsylvania, Delaware, New Jersey and Washington, DC sell their businesses – without charging upfront fees.

 

 

 

 

 

 

 

 

 

 

 

 

 

Tags: business brokers, business broker Pennsylvania, business broker Virginia, business broker Delaware, business broker Washington, business broker, business broker Maryland, business broker New Jersey, DC

Business Broker Report 13: Will The New Owner Keep My Employees?

Posted on Tue, Mar 18, 2014
employee getting fired when business broker sold businessYour  employees have stuck with you year after year, working hard to help build your business into a thriving enterprise. You wouldn’t be where you are today without them. So when it comes time to sell your business, it’s not surprising that you are concerned about their future. Will the buyer keep your employees on, or will he just "clean house” and put his own people in.

 

What’s the Buyer Buying Anyway?

Your business may have lots of equipment, vehicles and inventory. Or it may have long-term contracts, intellectual property or other valuable assets. Or it may be a service business with very little in the way of hard assets. In either case, it has one critical component– its employees. Your assets couldn’t generate revenues without them. It’s your employees who have the customer and vendor relationships and the specific knowledge and skills that generate revenues and profits. It’s your employees who make your company valuable.

 As worried as you are that a new owner might let your employees go, the new owner is more worried that your employees might quit! After all, what would happen to the value of your business after the sale if your key people left? Rather than “clearing house”, we find that new owners usually bend over backwards to make sure that the existing employees stay on and feel like they are valuable members of the team. They may offer (or insist on) employment contracts for key people. They will maintain current compensation and benefits. They typically don’t make any major changes for six months to one year after closing. And, oftentimes, they ask that you, the existing owner, stay with the business for a period of time after closing to help smooth the transition.

 So the worry that you may have that your employees will all get fired after the sale is largely unfounded – the new owner needs your employees and wants them to stay. Here’s a brief outline of what to expect with three different types of buyers:

 

1. Entrepreneurial Individual Buyer  

If an individual buys your company, he will likely do his utmost to keep your entire staff intact. He will essentially step into your shoes and, over time, learn the operational details of your business.  He will rely on your employees to keep the operation running smoothly.

2. Equity Fund Buyer

An equity fund buyer may already have an experienced manager to step in and run the company or, as often happens, may promote your second in command to COO and incentivize him or her with the ability to earn an ownership position in the business. In either case, equity fund buyers will typically want all of the existing employees to stay on.

 3. Industry Insider Buyer

If an industry insider buys your company, there may be some positions that the buying company’s existing staff can take over. Sales and production staff are typically safe, as are most lower to mid-level managerial positions; however, some higher-level managerial positions might be eliminated.

 For more information about issues that relate to selling your business, please visit us at www.primeinvestments.us. There are lots of white papers to download and blog topics of interest to business owners. If you would like to have a confidential discussion about your personal situation, click here, click on the link below or call us at 240 290-5000 We’ll be happy to schedule a free initial consultation and complimentary business appraisal.

 There’s never an up-front cost or obligation, and all communications will be held in the strictest confidence.

Schedule Your No-Fee Initial Consultation

Prime Investments Business Brokers takes the risk out of selling. For over 25 years Prime has been helping business owners in Virginia, Maryland, Pennsylvania, Florida, Georgia, Delaware, New Jersey and Washington, DC sell their businesses – without charging upfront fees.

 

 

 

 

 

 

 

 

 

 

 

 

 

Tags: business brokers, business broker Virginia, business broker Delaware, business brokoer Pennsylvania, business broker, business broker Maryland, business broker New Jersey