Platt Perspective on Business and Technology

Should I stay or should I go? 25: selling-off and buying out an already established business 5

Posted in career development, job search, job search and career development by Timothy Platt on August 23, 2016

This is my 25th installment to a series on intentionally entered into, fundamental job and career path change, and on best practices for deciding both when and how to carry through on it (see Guide to Effective Job Search and Career Development – 3, postings 416 and following for Parts 1-24.) And this is also my fifth posting to this series on buying or selling a small business or professional practice as a next step career move.

I began discussing the issues of selling and buying a small established business or professional practice from the buyer’s perspective in Parts 21-23 of this series. I then began addressing this complex of issues from the seller’s perspective in Part 24. And I concluded that by noting that I would begin working my way through the specific issues listed there, with the first of them:

• The question of what would be sold off and what this means to the person who built this enterprise, who would now be stepping away from it.

I am going to address this topic area and from a seller’s perspective, but before looking into that I am going to more widely consider what is actually included and involved in a sale of this type, where that usually includes a great deal more than just any owned, rented or leased physical assets held by the business. It includes interpersonal relationships and both as social and legal agreements and as personal obligations too.

• A small business or professional practice’s customer base enters in here, and this can in fact represent the single most valuable business-owned asset that a seller would sell off in their enterprise, and certainly when their primary professional asset has been in their hands-on skills and experience and not in physical resources such as inventory or equipment, or real estate. How would this asset be transferred over to a new owner and what if anything would be done to at least attempt to maximize continued customer loyalty for this business as it goes through this ownership transition?
• But any employees of this business to be sold have to be considered here too. Would they be kept on as employees by a new owner, and if so under what terms? Would they be let go, losing their jobs and if that is going to happen how would this be handled? Would they receive anything in severance? And whether they were kept on or not, how would their already accumulated benefits (e.g. banked but not taken vacation days owed them) be addressed?
• If the seller owns the physical space that they have worked out of and if they have gained extra income by renting off a portion of it (e.g. a floor of their building) to other small business professionals who seek to remain active in their businesses, they and any lease agreements with the seller have to be taken into account here too. Many rental agreements of this type are in fact legally specified through formal leases but many are managed and maintained more informally and on a month to month basis. That can become an important point of potential contention here.

A small business or professional practice can grow into becoming what amounts to an active part of a larger, overall community with suppliers and vendors, other small businesses that the now-selling owner and their employees have done business with, and more. When an owner sells off such an enterprise, all of these relationships are affected and significantly so, and for them at least ended. And looking ahead in this discussion, their ending for the seller can be an important consideration as to what selling off this business means to them, and certainly when their business has come to hold a self-defining meaning and value for them and a significant aspect of their life, and has not just been a source of income.

I raise and explore these issues here because they begin with the social and contractual relationships and agreements that all of these people have held with the seller. Divesting yourself of a business can and usually does mean selling off physical assets and determining and validating their true current market value, net of any liabilities or debt owned on them and net of any age-depreciation in value that might apply. And this means specifying and unraveling where necessary, loans, liens and other financial encumbrances that might be in place for the business, with a mutually agreed to resolution to all of that worked out with the buyer as well as any third party lenders – and certainly if the buyer were to assume any of these ongoing obligations. And any rental or leasing agreements and their terms and remaining contractual life spans would have to be resolved and agreed to with the buyer too – and with any third parties who hold equity included in this business too. And of course, a fair market valuation would have to be arrived at for any and all inventories, equipment, supplies and other goods, real estate equity and other physical assets held and wholly owned by the seller that would go with the business to a new buyer and owner. But selling or buying a business is only partly about things.

• I am going to continue this discussion in a next series installment, at least initially discussing tangible, and other business-owned assets (e.g. proprietary business intelligence) and their overall net valuation as that calculation helps to define the true market value of the business for seller and buyer.
• Then I will tie that line of discussion and this posting’s issues together in discussing a reasonable overall selling price for the business.
• And in anticipation of that, I will at least begin to address how the terms of sale, and terms of agreed-to buyer and seller action coming out of it (e.g. a seller offering specific types and levels of immediately post-sale transition support to the buyer) can help to both set an agreed to price and seal a deal for the sale itself.
• And after at least briefly delving into that, and as a perhaps addition here,to my to-address list of Part 24, I will at least briefly discuss issues of client confidentiality and legally protected personal information as possible hand-off of that in a business sale becomes relevant here.

Meanwhile, you can find this and related postings at my Guide to Effective Job Search and Career Development – 3 and at the first directory page and second, continuation page to this Guide.

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