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Key Things to Keep in Mind About Selling Your Growing Company

People start businesses for different reasons. Some individuals are hoping to remain in business for the long haul, potentially even passing down the company to someone in their family. Others enter for reasons of passion and interest but find that it fades over time. This can lead them to begin to consider the option of selling the business. A whole other group of business owners purchase or start a company with the intention of selling it from the outset. All of these different individuals will have separate motivating factors but they all need to carefully consider several aspects that influence their ability to sell.

What Are You Allowed to Do?

The first question to ask yourself when thinking about selling the company is what you’re legally allowed to do. If you have existing buy-sell agreements with other business owners and partners, that document created years ago may detail the only way that you can sell or exit the business. It’s important to return to this agreement and see what it says, as you may not be able to exit without some downsides on your end.

A partnership agreement with someone else may also stipulate the manner in which you can leave the business, including:

  • Phasing yourself out of the business over time
  • What happens with a sudden exit and how that influences your earnings from the sale
  • Transferring over your shares to a family member
  • Allowing your partner to buy you out

You can’t begin the process of considering a business sale without doing your homework to figure out any ways in which you may be limited.

Consider a Transition Period

The loss of important personnel can send shockwaves throughout a business. Particularly if you intend to continue reaping the rewards of this company in terms of profits, plan in a transition period. A sudden departure could hurt the business financially.

If you’re taking a lump sum, you may not be concerned about this, but your business partner may want to have you phased out gradually as well. If you’re vested in the continuing profits, your primary concern on your exit should be supporting the company as much as possible. It may be worth your time to stick around and train your successor.

Before selling the company or your part in it, have a sit-down with your experienced business lawyer so you understand all the implications of your decision.

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