Ready to stop but don’t know how?
Do you think it’s time for you to take a step back, reduce your work-load, spend some time reaping the rewards from the business you’ve built? Maybe you’d love to but don’t know how best to offload your business. You might not be sure whether there’s even a market for your it.
And so you stay. You carry on doing what you do best because that’s what you know and it’s more comfortable than starting the process of valuers, agents, marketers and so on.
It can be tough to secure that all-important sale but there might be opportunities in the market to sell your business: perhaps to a competitor, to someone in your supply chain or maybe to an unknown third party following some careful marketing. But if that doesn’t appeal, or if you don’t think there’s an obvious market for your business, have you considered a management buy out?
Do you have a good management team? Even if they appear to lack the necessary financial resources, an MBO might be one way to allow you to take that step back.
What is an MBO?
A management buy out is where the existing management team purchases a business from its owner. Often this means the owner has to wait a bit longer for their money as much of the cash used to pay for the business will come from future profits. There is however funding available for good businesses that can be used to pay for some, or even all, of the price up front.
Is it for me?
The key to success in MBOs is a good management team and a good quality business at its core. If you have both of these, then an MBO might be a workable option. While sellers often prefer to receive as much of the purchase price up front as possible, if you like the idea of handing the business down to your own team (maybe even your own family), you might be willing to forego early payment – especially if you don’t believe there to be much opportunity for selling on the open market.
You might also want to keep a hand on those reins you’ve had such tight grasp of all these years. In an MBO it’s often beneficial if the seller stays on for a while, helping to smooth the transition and give the buyers the benefit of your experience.
For buyers, an MBO can be an exciting step up: there’s nothing like the incentive of working for yourself. For sellers, an MBO can be a route to sale that might be less daunting then the process of an open market transaction but for some, it might be the only way out.
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