Running your own business can be very satisfying, but it’s also lots of hard work. Many entrepreneurs get to the point where they need to start raising capital to expand, or even begin slowing down. This is the reason many business owners start selling shares in their companies: so that they can continue to develop or make changes.
You will need to consider this decision carefully, and so we have put together some insights for you.
Why It May Be Time to Start Selling
There are several reasons to start selling off shares of your business, whether it’s the entire business or a percentage:
It can help you raise a lot of money, which can help settle debt, expand business premises or ventures, invest, etc.
There may be a change of leadership on the cards, and sole ownership of the business may not be the most suitable arrangement for this to occur.
If a new owner is to take over, the selling of shares can help lower the tax implications for them.
Selling part of a company can minimize the original owner’s risk and permit them to differentiate their private assets.
The founder may also simply want out, or to not grow the company any further due to reaching retirement, or some other milestone.
Make sure you know what you want for yourself and your company before you start selling. If you do want to sell, CGK Business Sales can help you do it. They can also help you see what options are available and how the whole thing would go down.
Partial or Complete Sale
You will need to decide if you want a partial or complete sale. Endeavoring on complete sale means, for the most part, that you end all involvement with the company after it is sold. Depending on the sale agreement, you may still get annuity payments, or have a contract to keep consulting, but you still will no longer own it in this case.
In the circumstance of a partial sale, you will need to be sure just how much to let go. The more you sell, the less control you will have over the business.
Options Available for Selling
You can either sell shares privately or publicly. While you can attract big investors as a private company, experts advise going public, as this is the best way to raise large sums. It is the most expensive option, but depending on your desired outcome, it could provide the greatest results.
Private selling is much cheaper, simpler, and faster. It is limited in terms of soliciting investors while not filing with the SEC, but this helps avoid some pitfalls. Venture capital, where the company sells shares to investors for money to grow the business, is the norm. A place on the Board of Directors is often expected by investors in this scenario.
You can sell to investors that you already have relationships with, but this may not yield enough capital.
Developing an Employee Stock Ownership program is also an option. If employees own a share in the business, they are more likely to be more loyal. It is not the best way to raise funds, however.
Make sure you know what your potential shareholders want, and what the value of your company is.
Get Organized
Get your business in order before starting to sell. You will also need to put together marketing material for sales purposes. A one-page summary and details on the business’ sales, cash flow, and profit are critical.
You can then start to ask investors for bids on your entire company, or on smaller shares.
Get Help From a Broker
There are numerous other important details to remember, so if you are seriously thinking of selling, we advise you to contact a reputable business broker for assistance.
