Transitioning Out of Your Former Business
In our last installment, we discussed the execution and closing of the sale of your closely-held business. Now, your deal has closed, and your buyer is the proud possessor of the company you built from the ground up. Should you stay on? Of course, any provisions concerning this will have to be agreed upon in advance, so do handle any such arrangements upfront.
Whether you should stay or want to stay for some time isn’t a “yes-or-no” question, as every business is different, and so are the needs of every seller and buyer.
But the answer often is “yes,” to assist your buyer in gaining acquaintance with your customers, your key vendors, and, perhaps most importantly, your team. These are people you want to reassure – and so does your buyer – that:
- Your customers will continue to receive the highest level of client service,
- Your key vendor contracts will be honored, and
- Your employees will be dealt with considerately.
If you are staying on, because that is what you and your buyer both want, this can be approached in many different ways. You may be needed (or at least wanted) for a few months, or for a year or more. And you may choose to remain employed, on either a full-time or part-time basis, or to merely enter into an agreement to offer consultation on a regular or as-needed basis.
You, along with your buyer, must decide the appropriate scope and time for your remaining engaged, if you are planning to do so at all.
The appropriate length of time (if any) for you to remain involved in your former business depends on various factors; the specifics should be nailed down in a separate employment or consulting agreement.
Some factors to consider when deciding whether you want to stay engaged might include:
- Whether your buyer is familiar with your industry and if so, how familiar.
- Whether s/he is from the same geographical area his/her new business is located in, with contacts and associates you and s/he share.
- Whether you have prepared your clients sufficiently for the transition (note that you will probably want to meet with each of your key customers and your buyer together, so that everyone is reassured and on the same page).
- Whether your key vendors have any discomfort with the change in ownership.
- Whether your team is to be kept on entirely, in part, or wholly replaced.
However, even a buyer familiar with your industry and region may need a little help, especially if you were the sole point person managing relationships and overseeing operations. If that’s the case, consider staying on for at least a few months to allow your buyer to see you do the job that will fall to him/her. It’s probably been a while since you were a newbie at any business, and it’s easy to forget what a steep learning curve can entail and what demands it can place on the new owner of a long-operating concern.
Consider staying on for a while as a last favor to the business you built, your key customers, your team, your buyer, and yourself. Taking a little extra time to ensure the buyer is prepared to run the business after the purchase is good for you, too, especially if the purchase price isn’t paid in full upfront.
Your continuing involvement, if you choose to remain for a while, can be broken into phases – for example, you might continue full-time for a month, part-time for another, and then either leave the buyer to run the business or remain available on a limited basis via a consulting arrangement.
But, while we do recommend, in many cases, at least some residual involvement on the seller’s part, it’s also important not to cling to a business you’ve sold. You’ve sold it for a reason – don’t let an emotional attachment to something no longer yours close your newly-opened horizons. Also, remember some buyers may prefer you not to stay on, so, if this is the case in the sale of your business, please do not take it personally.
You have a new life to live, new goals to be achieved, and new adventures to embark upon.
And we think you should take advantage of those opportunities to the fullest. Life is short. Carpe diem!
If you are considering a potential sale of your business, then I strongly recommend that you consult with us before making any major decisions – and the sooner the better, as selling a closely-held business can take a year, and sometimes longer.
Please click here to let me know how I can help you.
Until next time –