Part 2: Transitioning Your Business to a Family Member
In my last message, I discussed the challenges of selling your store to an outside party. It is really hard to get anything close to what you might think the store is worth, even if someone could actually write you a check for it.
In this message, I want to discuss a much more viable option in transitioning a business, and that is by selling your store to a family member (or an employee or employees) who you know and trust, and who will be able to continue the business with the values and fine name you have carried in the community for years.
First, you have to determine a realistic value for the business. There are professional valuation experts who do this for a living and I highly recommend hiring one to establish a fair value to your business. Besides the all-important financial considerations are the personal and emotional feelings you have about the business. If you have no personal or emotional ties to the business continuing, then you can almost always maximize your monetary return on investment by having a Going Out of Business Sale. I’ll discuss this in my next message, so let’s continue with how to deal with a business transition to a family member.
In order for the family member to start fresh, the person may want you to clear out your old merchandise with a retirement sale. This is a very reasonable and viable way to go because it will eliminate most of the aged and unwanted inventory you have accumulated over the years and allow your family member to take over with a more or less “clean slate.” If you opt not to have a major sale event to liquidate the inventory, the price you must receive from the sale of the business, even to a family member, must be much higher than what you would get without a sale. You need to make sure you are financially covered in retirement because there are few, if any, alternatives left after you retire.
In my next message, I’ll discuss the merits of a Going Out of Business Sale, and how I would recommend doing it if you seek this direction. In the meantime, if you have any questions or if we can be of any help to you, please give us a call.
Jeff Gordon, CEO