Business owners will benefit from preparing a business transition as soon as possible to address their values, stipulations, and concerns. A significant part of the process that owners must consider is whether an internal or external transition is more beneficial – this requires considering the financial and personal matters influencing their decision.
In this video, I weigh the pros and cons of pursuing an internal or external transition to add more perspective to this complex element of an overall business transition.
Find the transcript of the video below:
This is Keith Atneosen, founder of Freedom Summit Consulting.
One of the things that business owners need to weigh out is if they decide it’s time to sell, do they want to sell to someone internally or externally? These two different options will have very different outcomes.
By selling externally that means they’re going to find a third party to buy their business. It could be a strategic competitor, could be a financial buyer – and so that’s probably going to reduce their amount of risk the fastest. They’re going to have somebody that’s willing to cut a pretty significant check right off the bat and they’re going to be able to exit with probably very quick financial security.
On the other hand, they might value their legacy and mission more in terms of what it means for the business in the next season – and if they really want to preserve that legacy and continue that mission, the best way to do that is going to be to sell internally. The downside of selling internally is: in a lot of cases your management team, or your kids, might not have the capital to write that big check to you.
So in a lot of cases, it might even be seller-financed: where you, as the seller, are providing some financial structure for them to buy out over time. Now eventually, the Small Business Administration and other bankers may come into play, but it’s not going to have the same type of financial security as an external buyer.
On the other hand, with an internal sale, you’re more likely to have a preservation of legacy.
As the business owner, you want to ensure the transition is on your terms: it is essential to leave no stone unturned and to assess several aspects of your business to determine the best course forward. Having a certified exit planning advisor to assist you with a business assessment, a financial assessment, and a personal assessment is the most cost-effective and resourceful way to build a solid transition plan fulfilling your needs, wants, and goals.
Business owners seeking professional assistance pursuing business transition can book a consultation with me today. I look forward to helping you create a lasting legacy with your business on your terms.
