Entrepreneurs: 3 tips for selling or transferring your company in Switzerland

    Entrepreneurs: 3 tips for selling or transferring your company in Switzerland
    Maxime Dubouloz - Corporate Advisory Director

    Maxime Dubouloz

    Corporate Advisory Director
    Jules Boudrand - Corporate Advisory Director

    Jules Boudrand

    Corporate Advisory Director

    35,000. That's how many family-owned businesses will be sold to someone outside the family in Switzerland over the next five years. This number includes nearly 2,000 small or medium-sized businesses in the French-speaking part of the country. Behind these statistics, the reality is inevitably varied and every business owner has their own story to tell.

    Nevertheless, there is a consistent thread running through our experience of supporting sale, acquisition and valuation processes for Swiss companies over the past 15 years. Entrepreneurs can often underestimate the complexities of business succession. It is something that most have never done before and may never do again.

    Our suggestions are not meant to cause concern. Rather, the message we want to convey is that it would be a shame to successfully build up a business, sometimes over a whole lifetime, and then fail to optimise the succession arrangements.

    Here are three things to think about to maximise your chances of success when selling or passing on a business in Switzerland.


    1. Think about succession well ahead of time

    The first key to getting succession right is planning ahead. It is important to draw a distinction between "wanting" to transfer your business and "being ready" to do so. Effective preparation can have a considerable impact on the conditions in which a business is passed on.

    There are three distinct aspects to this preparatory phase.


    Prepare yourself personally

    Entrepreneurs need to be very clear about their reasons for selling or transferring their business. What is your plan? Keep working, scale back or step back entirely? What are the motivations that lie behind your choice?

    The answers will provide valuable insights into the steps that you as the business owner should take and potentially how the transition should unfold. This period generally lasts between six months and a year.

    We advise against lengthy transition periods. This can be a tricky time, particularly for the former owner, who now has an unfamiliar and potentially uncomfortable role: dealing every day with the new owner and their team.


    Anticipate issues for your family

    Selling or transferring a business often involves formalising the implications for the transferring owner's family beforehand. This applies not only to questions of lifetime gifts and inheritance, but also to preserving governance structures in the event of a transfer within the family.

    Let's look at an example of a father of two who wanted to transfer his company to his daughter. His son had no interest in taking over or getting involved with the family business. Despite this harmonious understanding, we made them all aware of the importance of drawing up an effective contract. This is because if the father had died suddenly, the son would have found himself in possession of half the company, a situation which no one – including himself – wanted.


    Structuring your business

    This final phase of preparation is all about the actual object of the transfer: the business itself. A company that is readying itself for sale needs robust processes and a clear organisational structure. If these are not in place, that should be remedied, much like putting your house in order before entertaining guests.

    Are the contracts with employees, customers and suppliers properly drafted? Is there a second or third in command capable of stepping up to run the business? Does the company rely on certain key individuals? These are just a few examples of areas where time and attention are needed to maintain the image of the business.

    The aim is to have an attractive, coherent story to tell future buyers. It is generally at this stage that professional advice can add significant value in optimising the conditions for succession. This is the subject of our second recommendation.

    It is important to draw a distinction between "wanting" to transfer your business and "being ready" to do so

    2. Get expert advice to improve the valuation of your company

    Business owners know better than anyone that success is a team effort. The ability to bring on board good skills and expertise is a critical success factor. This is all the more relevant when it comes to business succession – a rigorous undertaking requiring specific techniques and knowledge.

    Advisors specialising in business succession can provide insights into optimising exit conditions in a number of ways, over and above the actual preparations.


    Align your expectations with the market

    The value and price of a company are two fundamentally different concepts. Its value is based on quantitative elements that can be calculated using different valuation methods.

    The sell price, by contrast, also includes market factors, such as available liquidity, industry momentum and competition, or even the strategic priorities or financial circumstances of the purchasers. Advisors can provide a more complete view and identify the most favourable time to sell. This can help you take a more rational approach that prevents emotional factors from affecting the transaction and the relationship with the prospective buyer.


    Manage confidentiality

    The role of the advisor is to generate interest from multiple potential buyers, while upholding the confidentiality needed for projects of this kind. Beyond the signing of confidentiality agreements, the advisor ensures discretion throughout the process, following a defined, tightly scheduled timetable.

    Advisors specialising in business succession can provide insights into optimising exit conditions in a number of ways, over and above the actual preparations

    3. Looking to the future and planning the management of your wealth

    Optimising the way you transfer your business also requires you to look ahead. This applies on several levels.


    Don't neglect the emotional side

    The first of these is the personal level. Many business owners feel something akin to bereavement when they let go of the reins. You should not underestimate the emotional and psychological impact of an experience like this. That is what makes it so important to consider what comes next, sometimes even before the sale process.


    Optimising your tax position

    In some conditions, it is possible to efficiently manage your taxes with a view to a sale. This point too needs to be addressed as early as possible in the transfer process, leaving enough time to put the necessary arrangements in place.

    Read also : How to invest to realise your future and optimise taxation | Lombard Odier


    Taking a holistic approach to your wealth

    From a personal perspective, selling your business means suddenly transforming an illiquid asset into a liquid one. Business owners tend to have ideas about what to do with some of this money (travel, house, car, etc.). However, they often overlook how best to allocate their wealth with a view to preserving it and reducing risk.

    They also need to ensure that this capital will enable them to maintain their desired lifestyle over the long term, or even across generations. There are numerous ways to address this, applying personalised, holistic approaches tailored to each business owner's particular life goals.

    In some conditions, it is possible to efficiently manage your taxes with a view to a sale

    Lombard Odier will support you throughout the entire sale or transfer process

    Lombard Odier has a dedicated Corporate Advisory centre of expertise. This service is dedicated to assisting our entrepreneurial clients with all strategic decisions relating to the sale, transfer and valuation of their businesses. If you're interested, we invite you to download our white paper on the topic or to get in touch with us.

    Important information

    This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.

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