How to mitigate risks when transferring a small business

Do you want to sell your business? Make sure to prepare well to achieve the best outcome. This is especially important for small businesses or sole proprietorships, where smart knowledge transfer is crucial.

In small businesses, much depends on one person: the owner-manager. Over the years, as an entrepreneur, you've built strong relationships with customers, suppliers, and partners like banks and government agencies. Customers often return because of the personal connection they have with you. The question is whether they do business with your company or with you as an individual. Will customers keep coming back if your company has a new owner? Often, the majority of knowledge and know-how resides with the owner-manager.

Steps to Reduce Risk for a Buyer

Stay on board after the takeover. Buyers often want the seller to stay for a while after the takeover to help with the transition. This is usually between 6 months and 1 year.

The purchase price is often divided, with a portion dependent on future revenue and performance, also known as an earn-out. If the company achieves certain goals as specified in the purchase agreement, an additional payment follows. The earn-out ensures that you, as the seller, stay motivated for a smooth transition and provides the buyer with confidence.

If you have staff, you can start transferring specific knowledge to key figures well before the sale. By involving multiple staff members in customer contacts, knowledge transfer and the handing over of the customer portfolio becomes easier. Customers continue to see the same contact persons, who remain employed even after the sale.

Transferring specific knowledge and authority isn't simple. Every entrepreneur can prepare for this by delegating tasks during periods of absence, like vacations. These processes of knowledge transfer are crucial for successful continuity.

Do you want guidance in this? UNIZO offers a program for tailored advice for sellers of small businesses.