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Thinking of selling? Consider becoming a partial shareholder.

Simone Brunton

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Simone Brunton

March 21, 2017
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You’re working hard in your business—so hard, in fact, that there’s literally no time to work on it anymore. Less-than-enjoyable mundane tasks dominate your days, not to mention your evenings, leaving no time for the big-picture strategizing—the stuff that lured you into entrepreneurialism in the first place. But the business is doing well—really well, in fact. Which makes you wonder: should you stick it out, even if you don’t love it anymore? Or sell it and move on?

For many private business owners, this is an all-too-familiar scenario, and one that drives many to sell 100 percent of the business to the highest bidder. Few pause to consider another option: selling less than 100 percent and staying on as a partial shareholder.

Selling a majority portion of your business and holding onto the remaining portion could offer a number of benefits for both seller and buyer. For example, the seller—who’s likely tired from the daily grind of running a booming business— may be able to take a step back and embrace a more strategic role in the growth of the business. The buyer, on the other hand, can spend less on the purchase of the partial business than the entire business and can also benefit from the expertise of the owner. Further, if the two parties work well together, and the business grows, the previous owner may be able to sell his or her remaining share of the business down the road for a higher pro rata value than when the buyer and seller entered into the original transaction.

So why don’t we see more of these selling arrangements? Well, they’re not that easy to come by—for a couple of reasons.

You have to be willing to give up control

For this type of arrangement to work, the seller has to understand that the majority of the business now belongs to someone else. If you’re staying on, you not only have to enjoy working with the new majority owner, but you have to trust in their judgement, too. While you may still play a significant role in the company, you no longer call the shots—which can be difficult, particularly in situations where you don’t see eye-to-eye.

You have to find the right buyer

Retaining a partial share in your company only works if the buyer is on board, which doesn’t happen all that often. Most buyers prefer to buy a company outright rather than attempt to work with the previous owner. That said, if you find a buyer who shares your vision, and who would benefit from your expertise and skillset, they might be more eager to keep you on in exchange for a lower price tag at purchase. In many cases, the ideal buyer—or buyers—can be existing employees who already understand the business and work well with the previous owner, allowing for a smoother transition.

While a little unconventional, selling your business but staying on as a partial shareholder can be a win-win situation if you can find the right fit. Not only will such an arrangement allow you to avoid burn-out, but it could also allow you to remain involved in the growth of your business—and perhaps watch it reach heights you never thought possible.

About the author:

Simone Brunton

Simone Brunton

Director, Advisory Services
Email: Simone.Brunton@ca.gt.com
Phone: +1 250 712 6802
Office: Kelowna

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