Should You Sell Your Business To a Third Party?

05.14.19 Part One: Personal and Emotional Issues - Question & Answer #6

Question: Should you sell your business to a Third Party?

Short Answer: In most cases, the answer to this question is “yes.”

Longer Answer:
There are many advantages when selling your business to an independent third party and a lot of these advantages mirror the disadvantages that arise when selling to a family member or key employee.  By selling to a third party, you will have the highest probability of receiving the most compensation for your business in either cash or publicly traded stock, and you are increasing your chances of a larger financial payout.

By selling to a third party you will be more objectively, you will let your transaction advisors do their best negotiating to attain you the most favorable deal.  Your advisors will negotiate to get you the highest possible purchase price and so you receive as much of the purchase price in cash as possible.  Cash is financial security.

A third-party buyer will pay the purchase price of your business either with cash, cash plus a promissory note, stock, or a combination of stock and cash or a promissory note.  Meanwhile selling to a key employee or family member you will only receive cash or cash plus a promissory note.  If you sell to a publicly traded company, their benefits package including stock options can be very generous. 

Third parties offer owners the flexibility of accepting payment in some form of cash and stock, and this is where you need to ask yourself, “Does this advantage really benefit me the owner?”  There is risk involved when accepting stock instead of cash for the purchase price, and that is the uncertainty of will the stock appreciate in the future?

Another thing to remember is if you must terminate negotiations and you are selling to a third party, you never have to deal with that third party again about buying your business.

If you would like the complete answer or have any questions, please reach out to MB Law at info@mb-law.law to request your complimentary copy of "Deciding To Sell Your Business, The Key To Wealth And Freedom," that has over 50 questions & detailed answers.

 

Other Articles Relating to Transfer of Your Business:

Seven Steps To a Successful Business Transition

Should You Transfer Your Business To a Family Member?

Should You Sell Your Business To a Key Employee or a Group of Key Employees?

 



* This information is for general purposes only and is not intended to constitute any specific legal advice of any type.