When the time comes to retire and your business isn’t ready to sell, there are a few options for you as the owner. The best of these options is to work on your organization with trustworthy advisers and sell when it's ready. This will take time, but allows for the best price, smoothest transition and greatest peace of mind as you ease into retirement.
If you're long past retirement age and just want to be done, it can be hard to put in the time to prepare for a sale, but consider the alternatives.
You could seek out a competitor and offer to sell them your business for a song. With the right price, you can likely find such a buyer. While this option means losing out on the potential value of your business, it is often a better solution than shutting down.
A shutdown is your absolute last resort. Locking the doors and backing away is possible, but it’s going to be the most time-consuming, stressful and expensive of all your options. After you cover the expenses, you may have nothing left as you start retirement. This is especially bleak when you consider the fact that it doesn't have to end this way.
Consider what goes into shuttering a business. It can sound simple. Pay the bills, fulfill the contracts, pay the employees and leave. In reality, there’s more to it and even if you’re shutting down a very small business, it’s expensive.
Consider a simple example: A business owner wants to shut down his $3 million manufacturing company. He only has a dozen clients. To shut his doors, he'll need to fulfill his contracts which means he'll need at least some employees to keep working until these obligations are complete. Ideally, he'll want to time his contracts, purchase orders and lease to all end at the same time, before laying off his employees, but this kind of congruent timing isn’t going to just happen without a great deal of advanced planning.
The simplest way for our imaginary business owner to shut down would be to lock the door, put up an “Out of Business” sign and inform his customers they’re out of luck and need to find someone else. Ideally this would be timed to coincide with the end of the lease (again, only with planning). Not only is this the worst way to shut down a business, it’s simply not realistic.
Even the crudest, simplest shutdown requires advanced planning to avoid legal entanglements. How you handle your contracts, customers and employees will have legal ramifications. You'll still need to sell off equipment, empty your warehouse and clean up the property so your landlord can rent it out immediately—otherwise you could be stuck with a bill for accrued rent the landlord isn’t getting while preparing the place for another tenant. Any proceeds from selling equipment may or may not cover the costs you'll face, which may include your lawyer, tax expert or other adviser (highly recommended to keep you out of legal trouble), auctioneer, document preparation and filing, final payment of employees (potentially including unused leave) and financial obligations ranging from tax filings specific to shutting down, business debts and maintenance of records for the required length of time after your shutdown.
If you're going to put the effort into shutting down, you might as well prepare for a sale. If that's an overwhelming idea, keep in mind there's more than one way to sell a business.
Selling ‘As Is’
Let's say your organization isn’t ready to sell, but you’re convinced shutting down is the worst option. Finding a broker to help sell your business ‘as is’ will be difficult since brokers need to justify the time they spend on a business. This is usually in the form of their commission, which isn’t going to be big enough with a small business selling as is. Even a consultant is going to be difficult to recruit in this case, but selling is still possible—and better than shutting down.
Without a broker, you can still contact a competitor to see if they want to buy. If they do, you’ll need an attorney to handle the contract and help you with the legal processes involved with laying off employees. It’s also smart to engage your accountant to keep the transition orderly. You can do it without one, but it’s going to be a mess and increases your chances of facing legal battles. Again, you have legal obligations which will not go away until you fulfill them.
This sort of sale isn't the worst thing, but it's not the best in light of what could have been. Your business is likely the biggest asset you own, and with the expense and effort it takes to fulfill your obligations to sell as is or shut down you might as well work with advisers who will help you prepare for a transition more likely to benefit you.
Even if you just want to be done with the whole thing, there are better ways to go about your exit that can keep you out of legal trouble, bring in some income for retirement and allow your business to continue serving your customers, vendors and employees. Talk with a trusted adviser and take a long, hard look at your options before you decide. You could be pleasantly surprised.
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