Creating exit strategies when selling your business is already complex, but it becomes even more complicated when your business partner doesn’t want to sell. In order to protect your interests and ensure there’s a smooth transition, you should approach the situation with thoughtfulness and a well-formulated strategy.
Here are some steps you can take to create an exit strategy when you want to sell but your partner doesn’t.
Address Your Reasons for Selling
Take time to thoroughly articulate your reasons for selling. Do they have to do with financial performance? Market conditions? Personal circumstances?
Your reasons for selling may have to do with your partner. Perhaps you’re unhappy with their contributions to the business.
Whatever reasons you have, clearly defining them will help you properly communicate your intentions to your partner when you discuss selling your business.
Honest communication is a good tool to have when addressing wanting to sell your business. If you’re unhappy with your business partner, have an honest conversation about what you’re unhappy with while trying not to be hostile or accusatory.
Your partner may be going through personal struggles that have negatively affected their ability to focus on business. Having an honest conversation can help you work together to come up with a consensus on what’s expected from each partner for the sake of the business.
Putting these expectations in writing and establishing a timeline for performance goals can help add structure to the conversation.
Review Your Partnership Agreement
One of the first steps you should take is reviewing your partnership or operating agreement, which should have defined terms and conditions for selling or transferring your business. The partnership agreement may also contain language to help guide you through a conflict with your partner.
Knowing what’s included in your partnership agreement can help you understand your obligations and legal rights in the situation.
Negotiate Exit Terms
Once you’ve put together an exit strategy, you should negotiate the terms of the exit. This may involve payment terms, non-compete agreements, valuation, etc. Be prepared to negotiate these aspects of the exit as part of the transaction.
Determine Business Valuation
Part of your exit strategy should be determining the fair value of your ownership. A valuation expert or business appraiser can help with this based on market conditions, your company’s financial performance, and contemporary industry standards.
Explore Alternative Solutions
If your partner does not want to sell the business, there may be alternative exit strategies that allow for both of your needs to be met. Some examples include:
Instead of selling your entire business, you could sell part of your ownership to your partner or an interested third party. A partial sale allows you to get some return on your investment while allowing your partner to control the business.
This is the process of bringing in outside investors, which allows you to receive a cash payout while enabling your business partner to continue business operations.
If you have key high-performing employees who are interested in business ownership, you could consider a management buyout. This allows you to sell your ownership to an existing manager on your team, which may be a good compromise with your partner.
Bring in Professional Advisors
If you and your business partner cannot come to an amicable agreement that meets both of your objectives, you should consider bringing in professional advisors who can provide help.
A neutral third-party advisor can act as a mediator who helps both partners be heard without feeling bullied or isolated in the process.
Consider Taking Legal Action
If mediation and negotiations don’t go anywhere, you may need to consider contacting a lawyer. An attorney can review business documents and the status of your business, then offer assistance when negotiating resolutions between you and your partner.
If your partner hasn’t been taking your selling efforts seriously, bringing in legal experts may persuade them to either contribute more to the business or move forward in the negotiation process.
Get Professional Help from Zabel & Co.
Selling your business is a major transition. In order to ensure you’re doing it correctly, you should work with professionals who can make the transition as seamless as possible.
If you want to sell your business, talk to Zabel & Co. We can help you create an actional exit plan for your future retirement. Let’s connect to chat about your options.