Paul Quintero, CEO of Accion East, discusses why and how an owner might transition their small business.
When one is thinking about transitioning a business, some of the things that we might advise them to do are first understand why. So if you’re transitioning, for example, because you’re at the end of your life or the end of the work life and wanted to enjoy perhaps some more social fun life, um, I call that the cashing out. There’s one path. If you’re transitioning because you’re looking to start something new then the question I have is whether the existing business is something you also want to monetize to invest in the new business or is something that you just don’t want to continue investing in its growth but want to keep an interest in and you just want to move over. Depending on the nature of why you’re trying to transition the answer of how to transition will manifest itself. If you’re in the first case where you actually are looking to create a realizable event in terms of sale, then the type of things you need to do are to begin to accurately document your revenue and expenses so that a buyer can come in and understand, for a period of two to three years, what have been your income and expenses so they can put a value on your business. 2) It would be a great opportunity to try to maximize, um, the number of contracts you might have, customers you may have, to show some acceleration and growth. Oftentimes this is, you know, considered dressing up yourself for a sale. Buyers like to know that you’re a growing business. If you haven’t been growing it might be good to start to put the pedal to the metal, so to speak, in terms of growing new, new prospects. And then, um, importantly, think about what the business has that can continue without you, without you because if the business cannot continue without you then the buyer doesn’t really have much that they’re owning. So, those would be things I could say generally, if you were, if you’re looking to cash out. If you’re looking to transition I think you have a lot of, um, more gray area. If you’re transitioning because you’re tired of trying to invest in the business and want to move on but you believe in it, you can sell the business to someone else and keep a little bit of the ownership so that if it takes off you still benefit. So never exit it completely. If you’re trying to sell, or you need to transition the business and use that money for the new one then you have to do the same thing that I just described before, which is position your business for sale. And, and follow the same instructions. So, depending on, on the reasons and the motivations, there are different things that you can begin to do to put yourself in order and to, to position yourself for, for a good buyer.