Selling a business that you’ve inherited can be a complex and emotional process. While some may choose to keep and run the inherited business, for others, selling it may be the best option. This decision can be influenced by many factors such as your interest, skills, time, and the business’s profitability or potential.
Inheriting a business frequently represents a legacy from a loved one. Often, it’s not only an inheritance of wealth but also of dreams, aspirations, and hard work. However, managing or selling an inherited business comes with its unique set of challenges.
This article aims to guide you through the process and help you make an informed decision
Understanding Your Inherited Business
Before making any decisions about the future of your inherited business, it’s crucial to familiarize yourself with its operations. This step involves learning about the various aspects of the business, including the products or services it offers, its customer base, financial status, and the industry it operates in.
There are several ways to learn about the business. You could start by reviewing its financial records and business plans. Talk to employees, customers, suppliers, and competitors to gain different perspectives. You might also consider working in the business for a period of time to get a hands-on understanding of the daily operations. Additionally, seeking advice from a business consultant or industry expert can provide valuable insights.
The more you understand the business, the better equipped you’ll be to make decisions about its future.
Evaluating the Business
Evaluating an inherited business generally involves assessing its worth and the potential it holds for future growth. There are multiple methods to determine the value of your business. It could be based on its assets, earnings, market values, or a combination. You might consider using financial evaluation metrics such as EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), or comparing your business with similar ones in the industry.
But frequently, these calculations can’t tell you the true “value” of your business or what you can get for it on the open market. At NIN, we have a more complex philosophy regarding business valuation and asking price.
In reality, the asking price is related to what someone will pay for a business. And what someone will pay for a business depends on finding the right buyer. When inheriting a business, it can be difficult to know the intricacies of the operations and what its true “value” is. This is one of the many areas in which a consultancy can help you.
Deciding Whether to Sell
It isn’t always a given that you’ll sell a business you’ve inherited. Emotional considerations are deeply personal and can be tied to the legacy of the loved one who left you the business. You might feel a sense of duty to continue their vision or worry about the potential impact on employees who might have been loyal to the business for many years. On the other hand, you might also feel overwhelmed with the prospect of running the business, especially if it’s in an industry you’re not familiar with or if the business is struggling financially.
Practical considerations, on the other hand, involve more tangible factors. These could include the current state of the business, its profitability, and future prospects. Furthermore, you would need to evaluate your own capacity and willingness to invest the necessary time and effort to manage the business. If the business is in a declining industry, or if it is heavily in debt, it may be more practical to sell. Additionally, your own interest in the business sector, your skills, and your career plans should all factor into your decision.
In the end, it’s essential to find a balance between these considerations. While the emotional connection to the inherited business is important, it’s also crucial to make a decision that is financially sound and in line with your personal and professional goals. Consider seeking advice from a trusted mentor, business advisor, or a consultancy firm to help guide you through this decision-making process.
Preparing the Business for Sale
Legal Preparations
Preparing your business for sale starts with ensuring that all legal aspects are in order. This involves reviewing, updating, and organizing all legal documents related to your business. Contracts, licenses, permits, lease agreements, and articles of incorporation are some of the documents potential buyers will want to inspect. It is best to consult with a qualified business attorney to ensure all legal matters are addressed appropriately.
Financial Preparations
A key step in preparing your business for sale is getting your financial records in order. Prospective buyers will want to conduct due diligence, which includes a thorough review of your financials. Ensure that your income statement, balance sheet, and cash flow statement are up-to-date and accurately reflect the financial health of your business. Remember, transparency is crucial in this process; any discrepancies discovered might lead to a loss of trust and potential deal breakers.
Operational Preparations
Operationally, the business should be in a condition that it can run smoothly without the need for your daily input. Having efficient systems and processes in place will make the business more attractive to potential buyers. This includes documenting all operating procedures, training programs, and any other systems that make your business unique. It’s also advantageous to ensure that your employees are well-prepared for a transition. A fully operational business that can thrive independently of its owner is a compelling selling point.
Finding Buyers
Once you have decided to sell the business, the next step involves finding the right buyer. This step is important, especially if you want the business to continue flourishing under new management. Here are some key points to consider:
- Identify Potential Buyers: Start by identifying potential buyers who may have an interest in your business. This could include competitors, suppliers, clients, or investors in the industry. intermediary consultants and online business marketplaces can also help connect you to potential buyers.
- Qualify Buyers: Not every interested party will be a suitable buyer. Assess the financial capabilities of potential buyers and their relevant experience in the industry. This will help ensure that the business is sold to someone who can manage it successfully.
- Confidentiality: Be careful about disclosing information about the business sale. You don’t want to unsettle employees, customers, or suppliers. Hence, only share details with serious prospects after they have signed a confidentiality agreement.
- Presenting Your Business: You will need to present your business to potential buyers. Make sure that you showcase the strengths and opportunities of the business, but also be honest about its challenges. A well-prepared business plan can be a great tool for this.
- Negotiating the Sale: Be prepared for negotiations. It’s advisable to have a minimum price in mind but be prepared to adjust it based on market conditions, the buyer’s offer, and other factors.
Remember, finding the right buyer is not just about getting the highest price. It’s about ensuring that the business you’ve inherited continues to thrive under new ownership.
Partnering with NIN: Your Business Strategy intermediary consultant
Navigating the complex journey of selling a business can be daunting, particularly when it’s an inherited one with emotional ties. However, you don’t have to embark on this journey alone. Partnering with a seasoned business strategy intermediary consultant like NIN can significantly streamline the process, providing you with the expertise and guidance you need every step of the way.
Our team of dedicated professionals will work with you closely, ensuring that your business is appropriately valued, attractively presented to potential buyers, and that your interests are protected throughout the negotiation process.
Undoubtedly, the decision to sell a business is monumental. Make it count by entrusting this process to those who understand its intricacies best.
Contact NIN today and let us guide you through the seamless transition of your business to its new owners. Together, we can turn the next chapter of your business legacy into success.