Should I Sell My Business For Installments, Or Should I Take The Money And Run?

On April 28th 2014 Forbes.com published an article on the subject of selling businesses and started a discussion regarding whether it is better to sell the business for a lump sum or instalments. This is an area where I have considerable experience and therefore believed I had valuable insight to share with the readership and Forbes.com agreed as they highlighted my comment as a "call out" - my first one. I therefore wanted to share it on here.

"Exiting from a business in my experience is one of the most stressful event in a persons life and structuring the sale is very important. It’s not as easy as saying “which option gets me the highest value” as the tax implications have a drastic effect on the real “worth” of the business.While many business owners want a clear cut split from the business it is often more financially rewarding for you and increase your probability to secure a good sale price if you structure the sale over a period of time.

One option which has been proven to increase the valuation of a business is a staged sale where the existing owner remains in the business for a pre-defined period of time to aid the new owners establish the business and be introduced to existing clients while the new owners can call on the expertise of the former owner. This solution has been successfully utilised to increase the value of the business asset – both buying price and earned consultancy fees for helping the new owners while giving your prospective buyers added confidence in the business (why would you stay involved if it was failing?) and giving them a higher probability of successfully owning and growing the business.

Engaging the services of an experienced business broker and corporate lawyer is key when structuring a buying package which is as beneficial to all parties as possible." 

You can read the initial article and other comments direct on the Forbes.com website.