Maybe You Don't Need to Sell

Selling a business can be difficult and expensive. Bill Fotsch suggests an alternative: ownership independence.

Good Morning!

Here are today’s highlights:            

• Ami Kassar wonders why it always seems to take a crisis to spur action.

• We all have a lot at stake in the battle to regulate artificial intelligence.

• Maybe this is the right time to raise the federal minimum wage.

• What do you do with a million square feet of vacant drug-store space?

SUCCESSION

Bill Fotsch suggests what he calls a no-cost succession plan, and offers an example of how it works: “Once the company was profitable, financially secure, and growing, our discussion turned toward succession planning. Despite the company's success, we were having trouble garnering interest in its purchase, due to its small size and remote location. And potential buyers questioned whether the business would be viable without the owners' daily involvement—a common concern among prospective buyers. We estimated the best-case scenario for selling the business: net transaction costs, various fees for attorneys, accountants, valuations, etc. Our guess was $1 million, if we could find a buyer.”

• “I asked the owners what kind of return one could expect. Five percent annual income, before capital appreciation, was the optimistic figure. We compared that with the current business cash flow of $400,000—$400,000 per year from the company seemed vastly superior to $50,000 per year from investments.”