Sell or Hold?

Many owners start their business with an end goal in mind. They anticipate growing the company over the years with the assumption that, when the time is right, they would sell the company to family, other partners, or to a third party. However, as the years pass and retirement comes closer into view, for any number of reasons a sale of the company is not desired. There is another option to consider. Maintaining ownership in your business can often be the most lucrative strategy, but what will it take to retain ownership into the future?

Retaining ownership does not mean an owner cannot slow down or pursue different ventures. Instead, an owner can take a passive ownership position that allows him or her to benefit from the productivity of the business while letting a new or existing team manage and operate the company. In fact, this strategy can be more lucrative than a sale scenario. However, passive ownership does not come without risk and those risks need to be carefully considered and managed. You would still be the owner of the company, and ultimately responsible for the business. Cash flows can dip, employees can leave, and much of your wealth is still tied to one single asset. With that said, the tax efficient cash flows of the business can be worth the risk.

Key Considerations

• Do I want to be responsible for the ongoing risks associated with owning a business?
• Can the business survive without my day-to-day involvement?
• Who can I trust to run the business in my absence?
• Is the management team respected by my employees?
• How would I incentivize employees to run the business as I would?
• What are the financial and non-financial risks of this strategy?
• What are the future cash flows of the business?
• Would I need to sell or give pieces of ownership overtime?
• Will I need a Board of Directors or Advisory Group?
• What are the tax benefits of this strategy?

How We Can Help

The decision to transition ownership and/or management of your business may significantly impact lifestyle, family members, and employees. Most owners encounter these decisions only once in their lifetime.

We specialize in helping owners and founders of privately held companies build and implement business transition strategies. Since our founding, we have transitioned close to1,000 private companies nationwide.

Contact us at info@coldstreamcapitalpartners.com to learn more about how Coldstream Capital Partners can help you and your business.

Download a copy of this article here: Is Passive Ownership Right for You?