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INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads | | AUGUST 15, 2000 SMART ANSWERS Exit This Way Some strategies for getting the most out of closing down your company
Q: My 50-year-old, family-owned travel agency needs to be shut down. I could use some tips on how to accomplish this properly. --M.G., Fairfield, Conn. A: Every business needs an exit plan. Strategies vary according to your company's legal structure, so you'll need to enlist an experienced attorney to help you close the agency properly. Even if your business has deteriorated and you can't find an outright buyer, experts say you should be able to sell off pieces. Your core customer list, your business name/brand equity, Web site, fax, and telephone numbers are all valuable assets that will be attractive to someone -- perhaps even a former competitor. Consider hiring a business broker to help you value these assets. Don't forget to add in your company's goodwill -- an intangible but important part of any sale. "Many business owners fail to realize the market value of a business in circumstances like this," says John P. Delmatoff of PathFinder Coaching in Diamond Bar, Calif. "Unless the business is virtually bankrupt or otherwise nonviable, you should at least consider the option of selling." You should be able to get between 50 cents and 70 cents on the dollar up front for your receivables, says Martin Pichinson, an asset-liquidation specialist at Sherwood Partners Inc. in Los Angeles. If your customers are handled right, studies show that 60% to 70% of them will transfer their business to the company buying your core customer list. Send a letter to your current customers informing them that you've made arrangements with the company buying you out to take over your ongoing business. If you can, offer to call key customers. The more you can be involved in finessing the transfer, the better the price you can get for your assets. SUBLEASING. If you have a long-term lease, your rent may be less than market value, and your landlord should be happy to release you from the contract. If you're able to stay involved, the company that is buying your assets might be interested in a below-market sublease, Pichinson says. Be very careful about subleasing if you have a personal guarantee on the property, however. If the new tenants default, your personal assets could be at risk. Tell all your suppliers and employees, in person and in writing, that you're closing (have your lawyer clear the letters first). Rumors, such as why the business is closing down and who will or won't be paid from the assets, can greatly complicate the entire process, so don't let them get started. Have a question about running your business? Ask our small-business experts. Send us an E-mail at smartanswers@businessweek.com, or write to Smart Answers, BW Online, 46th Floor, 1221 Avenue of the Americas, New York, NY 10020. Please include your real name and phone number in case we need more information; only your initials and city will be printed. Because of the volume of mail, we won't be able to respond to all questions personally.  By Karen E. Klein  | | |
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