TORONTO—Value realization means converting the value of your business into cash for other purposes (investing in another business, retirement, etc).
Business owners must face the reality their business could be sold someday. Despite the prevalence of articles and books dealing with “succession planning,” many business owners often don’t consider value realization strategies until they are forced to. By then, the owner may not have the variety of choices available to maximize proceeds.
Business owners can realize on the value of your investment through internal sources or external sources, such as:
- Gift or sale to next generation in the family
- Distribution of excess cash over time
- Sale to insider or entire management team
- Sale to strategic buyer, private equity, entrepreneur
- Recapitalization of balance sheet and distribution of cash to owner
- Initial public offering
Value creation strategies are most successful when owners time a sale to coincide with favorable personal and business conditions.
These conditions include the owner’s personal situation, economic and industry conditions and the company’s recent and prospective operating results.
Planning ahead helps owners and operators understand alternatives and gain the flexibility that can improve the probability of success.
Suzanne Loomer is Managing Director at Campbell Valuation Partners Ltd.
in Toronto. She can be reached at firstname.lastname@example.org.