Alternatives to Selling Your Business

The choice to sell a business often arises from pressures beyond the owner's control. Family responsibilities, partner disputes, lagging prices, and product or market shifts can all take a toll on a company and its owner. Selling the company outright, however, is not your only way out. Today more than ever, there are a number of different options available to business owners who want to reduce their role but don't necessarily want to leave the business entirely.

4 alternatives to selling your business

1. Going public

The initial public offering (IPO) has garnered a lot of attention recently, and while many view it as an ultimate goal, it also can be a good alternative to selling off the firm. Going public, which entails offering company stock to the public on an open market, can raise large sums of capital that may have been out of reach for your company.

Because each industry has different criteria for IPO success, be sure to research the IPOs of similar-size companies in your field before you move forward. Serious contenders should have a three-year track record characterized by accelerated growth. Ask yourself these questions: Do you have a good product and a good story? Do you have a market-driven reason to attract new capital? Can you partner with an underwriter?

As the owner, be aware that an IPO for your company will mean a significant loss of control. You will be accountable to outside investors, most of whom are in it for the money and do not share your passion for the company and its product. You will also encounter strict Securities and Exchange Commission regulations and record-reporting rules. As a result, once-confidential company information can become a matter of public record. In addition, the cost of going public can be steep, so it's definitely not the answer for a company that's looking for alternatives to bankruptcy.

Read Registering Your Initial Public Offering with the SEC for an overview of the key steps toward your IPO.

2. Selling corporate assets

Many companies get into trouble when they take on more than they can handle. Expanding or diversifying too quickly, buying unnecessary property, or absorbing smaller companies that turn out to be mismatches can all push once-successful firms toward failure. Though it's difficult to cut back or restructure into a smaller division in an industry, sometimes it's the best alternative to selling the business outright.

Before you decide to sell off part of your business, solicit an outside financial advisor to appraise your assets and determine a fair market price for each of the divisions that you're considering selling. When choosing what assets to sell, it's a good idea to look first at assets that aren't directly tied to your core business.

Also look at assets for which there is a strong market. This will ensure that you get the best possible price for those assets. Complex and thorny issues may arise when transferring the assets from a trust or company entity to an acquiring company, so be sure to obtain input from legal and accounting experts.

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• 5 Steps to Create a Viable Succession Plan for Your Family Business

3. Senior advising

The position of senior advisor or CEO emeritus may offer both a company and its founder a way to move smoothly through a difficult yet necessary transition. Or maybe a founding CEO needs a rest but hesitates to relinquish full control. Perhaps a sudden merger/acquisition or planned sale triggers a turnover in command, but the new owners value the benefit of retaining a veteran advisor.

Advisory roles also offer a reluctant company owner a way to exit gracefully when it's time to retire, or if stricken with a sudden illness.

4. Succession strategies

Privately held companies often make the mistake of neglecting to make succession-management plans. Failing to prepare the firm's next generation of leadership may stem from a lack of capable managers or a lack of interested family members. Outsiders generally view the absence of a succession strategy as a company weakness.

Failure to implement succession plans can dash a potential IPO, discourage a management buyout, and repel underwriters or institutional investors. In order to ensure a smooth transition, it is crucial for owners to establish succession strategies several years in advance. Family members and key employees are two good starting points when looking for potential successors.

See our Tips on Successful Succession Planning for more strategies to help structure your legacy.

RELATED: Is Now the Right Time to Sell Your Business? 10 Questions to Ask Yourself