Sometimes in business, you may come to a point where the best option is to shut down. Making the decision to close the doors of your company is difficult, but at times, the hardest choice to make is the right one.
This does not mean you’re in dire straits. Perhaps you know the right path for your business isn’t exactly the one you’re on—but that you’re not the one to correct its course. Perhaps you’re looking to work fewer hours or move to a new location. In such cases, you’ll want to consider a succession plan. How will you pass your company on to ensure its future success?
Selling your business will give you the most profit up front. Look for a buyer who knows your industry and wants your business for more than its parts. Once you’ve found a taker, make sure to let your employees and customers know, so they’re not thrown off with any new changes. Also, make sure you fulfill any financial obligations, like paying off debts. The US Small Business Association provides a very comprehensive list of steps to make sure you’re in the legal clear when closing, and you should always consult your attorney as well.
Step Back and Mentor
Is there a family member or long-term employee that could take the reins? You might already have someone in mind who would be a great fit to take over your business. If so, that’s a fantastic start to a plan.
But make sure you’re relying on more than his or her personality as you gauge the chance of a happy handover. Does this person’s vision for the future of the business align with yours? Does he or she have the traits and qualities you believe will make a good leader? Ideally, you’re not just looking for someone exactly like you—you’re looking for someone even better than you at leading your business. While that can seem impossible, try to reframe the situation as your chance to seek out someone who can make sure your business exists long into the future. Begin working with that person to teach them the ins and outs of owning the company as soon as possible, and make sure he or she feels fully prepared before the transition. It’s also possible you may find the right mix of traits in two different people; if so, you could turn over leadership to a pair who promises to work together seamlessly.
A merger takes place when two companies of similar size join together instead of operating as two separate entities. Merging your business could mean you continue to have a certain amount of input and even own part of the new, larger company. When considering a merger, it’s important to think about the culture at both companies. Often, the companies merging together were former competitors, which can make it hard for people to work together initially. Employees don’t always accept change as quickly or as easily as you’d hope, particularly those who have been around a while, or who find their roles overlap with positions at the new place. If you truly believe a merger is the best plan for your company’s health once you’re gone, impress that optimistic vision upon your employees—this solution will be better for them in the long run, if they’re able to give it a try.
An ESOP is an Employee Stock Ownership Program. With an ESOP, you give employees the option to buy into the company themselves and receive tax credits. Having an employee-owned business comes with its own unique set of challenges, but it is another viable and progressive transition option that, when successful, allows companies to become democratic environments where employees call the shots about their own workplace.
The decision to close a business is hard, but in many circumstances, it’s the right choice. The earlier you can start planning for possible succession, the cleaner the handoff and the better the chances will be.