Taking “Two Bites of the Apple”: How to Sell Part of Your Business and Stay in the Game

Selling your business doesn’t have to be all or nothing—the “Two Bites of the Apple” strategy lets you unlock liquidity, diversify your wealth, and still participate in your company’s future growth. Whether you leverage private equity, an ESOP, or a family transition, this approach gives you financial flexibility and ongoing influence. Here’s how to maximize value and minimize risk with a partial exit.

This partial exit strategy allows you to sell a portion of your business for immediate liquidity (the “first bite”) while retaining a stake for future upside (the “second bite”). You reduce personal risk, gain financial freedom, and keep a seat at the table as your business grows.

• First Bite: Sell a share of your business for cash, reducing risk and increasing personal liquidity.
• Second Bite: Retain ownership to benefit from future growth and a potentially higher valuation at a later sale.

This is ideal if you believe in your company’s future and want to stay involved while diversifying your assets.

1. Diversify Wealth: Gain liquidity to invest elsewhere while still benefiting from your business’s success.
2. Retain Influence: Stay involved in strategic decisions and maintain your leadership role.
3. Potential for Higher Returns: If your business grows post-sale, your remaining stake could be worth significantly more.
4. Flexible Transition: Step back from daily operations at your own pace, controlling your exit timeline.

Partnering with a private equity (PE) firm is a popular way to take a partial exit.

• How It Works: Sell a portion (often 51% or less) to a PE firm for upfront liquidity, while keeping a minority stake. PE firms bring capital and expertise to accelerate growth.
• Your Role: Remain in a leadership or advisory position, guiding the next phase.
• Second Bite Opportunity: When the PE firm exits (typically in 5–7 years), your retained shares may be sold at a higher valuation.

Pros and Cons:

• Pros: Immediate cash, continued ownership, access to growth resources.
• Cons: Potential loss of control, possible value misalignment.

Example: Many founders in high-growth industries, such as technology or healthcare, take this approach, leveraging PE support to scale up and eventually cash out at a much higher valuation.

An ESOP lets you sell shares to employees, creating an ownership culture and providing staged liquidity.

• How It Works: Sell a percentage to an ESOP trust, which buys shares for employees over time.
• Your Role: Stay on as owner or transition out gradually, empowering your team.
• Second Bite: Continue to sell shares over time, maintaining some ownership.

Pros and Cons:

• Pros: Motivates employees, offers tax benefits, phased exit.
• Cons: Complex legal/financial setup, ongoing management required.

Example: Many small-to-medium business owners in industries like manufacturing and services use ESOPs to reward employees, reduce personal risk, and retain influence in the business.

For family businesses, a gradual transition can combine liquidity with legacy.

• How It Works: Sell or gift a portion to family members, receiving a payout while staying involved.
• Your Role: Mentor the next generation, maintain influence.
• Second Bite: Retain a stake for future growth or a later sale.

Pros and Cons:

• Pros: Keeps business in the family, phased transition, financial security.
• Cons: Family dynamics and succession planning can be challenging.

Example: Family businesses in industries like agriculture, retail, and real estate often use this approach to keep the company within the family while taking some financial security for the current owner.

Tax Implications: Each strategy has unique tax consequences—work with a tax advisor to optimize your outcome.

Deal Structure: Negotiate terms that protect your interests and future value, especially with PE or ESOP deals.

Cultural Fit: Ensure new partners or employee-owners align with your vision and values.

Growth Preparation: Position your business for post-exit growth by investing in systems, talent, and strategy.

1. Balanced Security & Upside: Gain early liquidity while keeping a stake in future growth.
2. Legacy & Influence: Stay connected and shape your company’s direction.
3. Flexible Timeline: Transition on your terms, not someone else’s.
4. Increased Value: New investment can drive growth, boosting your eventual payout.

With the right planning and partners, taking “two bites of the apple” lets you secure your financial future, maintain your legacy, and maximize your business’s value—without giving up control too soon.