You might begin the business transfer process with the thought that a sale to a key employee, co-owner or family member is the path to maximum cash on departure. This is very seldom the case. With proper preparation, more often than not, you can maximize the net dollars you receive by selling to a third party. Additionally, most third party sales are cash and seldom are you forced to “carry” more than 25 - 30% of the sale price.

The bottom line: Selling to a third party maximizes the money you receive and minimizes your finacial risk.

Surveys show most owners who initially want to transfer their businesses to co-owners, employees or family members, usually end up selling to an outside third party. While there are many reasons for this, the most common are:

• Your business is too valuable to purchased by anyone other than someone with access to considerable amounts of capital.
• Prospective buyers among your family or employees, are not capable of running the business.
• You want to receive a substantial amount of cash at close. This is not likely if you sell to co-owners, employees or family.
• Additional cash infusion into your business is needed for it to remain viable after your departure.
• Your employees or co-owners are willing to purchase only a part of your business.

Tags: business successor, departure objectives, leaving your business, sale of your business, transfer of business ownership, transfer your business