As 2014 draws to a close, I am stuck on endings. Last week, I watched the near-perfect final episode of “The Colbert Report” – actor Stephen Colbert retired the fictional blowhard “Stephen Colbert” and his eponymous “Report” to start a new gig in 2015 replacing David Letterman as host of “The Late Show” on CBS. What can a small business owner who is thinking about moving on learn from Colbert? Plenty!
- Just because you created something great, doesn’t mean you can’t seize new opportunities. Colbert had a good thing going with the “Report” – it was funny, politically astute, and had moments of brilliance. (I will miss The Word, sniff sniff.) But, the Comedy Central audience is a fraction of the potential viewers of CBS’s late-night programming. And, after nine years on the “Report,” maybe – just maybe – Colbert was ready to move on from the character he created.
- Don’t surprise your customers – have an exit plan. Colbert announced his plans to retire his character months in advance. Similarly, but on a much different scale, the owner of my favorite handbag shop announced her plans to close her neighborhood retail location several months before her doors will close for good. Loyal customers had the opportunity to pick up a final bag – and the business’s bottom line likely benefitted from these purchases.
- Decide what will happen to the business’s assets. In the penultimate episode of the “Report,” Stephen Colbert hilariously held a yard sale to sell off the memorabilia that had accumulated on the show’s set over the years – “in the most American way possible” – and also included R.E.M. singer Michael Stipe, who perched on a table surrounded by stuff and was marked down from $1 to a quarter. Just like “The Colbert Report,” a business has tangible assets (a.k.a. “stuff”) and intangible assets (such as experienced employees who plan to stay on), both of which contribute to the ultimate determination of the business’s value. A recent article in the Washington State Bar Association’s Business Law section newsletter sets forth insightful information on the valuation process. For many small businesses, when it is time for one owner to move on, their business partner(s) may plan to purchase that individual’s ownership interest in the business. The terms of determining the value of the business for this type of asset transfer between existing owners are typically set forth in a buy-sell agreement between owners. How the business is valued may depend on the reason for the sale – is the business still viable and thriving, or is it being liquidated?
- Figure out if your business needs to be dissolved. Obviously, “The Colbert Report” is not going to continue without Stephen Colbert. If the “Report” was a small business, rather than a television show, the business owner would need to decide whether it would be viable to continue without its founder. If not, the business owner will need to take legal steps to dissolve that business. And, even if you decide to sell your business, you might have to dissolve it anyway. Let me explain what I mean here: Businesses are generally sold in one of two ways: an asset sale (only the “stuff”), or an entity sale (selling the corporation or the LLC itself). If you opt for an asset sale, you will likely end up after the sale is done with a corporation or LLC which is an “empty shell” because it has no assets. What’s the next step? Should that business entity be dissolved? I’ll discuss this topic in the second part of this post in January.