So, you’re thinking about selling your business.
What is your “why”?
Is it to create a financial legacy? To pass along your business to family? To get the most money from the sale or the best outcome for your employees? Are you looking for a clean break or delayed retirement?
When you clearly understand your “why,” it becomes easier to plan and make decisions that align with your values and goals.
You have poured yourself into growing your business over the years, so you owe it to yourself to plan for its sale — and your future in the years beyond the sale.
Successful business transitions start with a solid plan and a solid team of advisors. Here are the important factors to consider in order to ensure your transition goes as smoothly as possible:
The timing
Consider Your Timeframe
Why are you considering the sale of your business now?
What are the reasons for your exit?
When do you hope to have the sale completed?
Your answers to these questions will help to determine your planning horizon. A business sale takes time; planning ahead will position you to optimize your outcome.
Assess the Market
When evaluating the market to determine the best timing, start with what is happening in your community, the broader economy, and with your competitors that might impact the sale of your business.
The team
Assemble Your Business Transition Team of Advisors
Depending on your business, your transition team may consist of:
- a broker to help you find the right buyer
- a business valuation professional to evaluate the worth of your business
- a business banker to propose industry-specific recommendations related to the sale
- a CPA to structure a tax-efficient transaction
- an attorney to negotiate and compose the deal
- a wealth advisor to help you develop a plan for the sale proceeds that will support your goals for your financial future
Each expert adds their own unique value and assists in maximizing the outcome of the sale.
Work With a Wealth Advisor
As wealth advisors, we can coordinate your business transition team of advisors during the sale and help you answer questions as you look ahead to your life after the transaction.
How should you invest the proceeds from the sale? What will your personal cash requirements be after the sale? How will you define your legacy?
And, let’s face it: from a financial standpoint, you are about to become very popular. How will you approach investment opportunities post-transaction?
We can build a custom framework through which we help you vet investment opportunities after the sale.
Based on your values and your goals, we can help you navigate through these questions and this process from beginning to end.
The transaction
Evaluate Your Business
Identify any possible issues that might delay or adversely affect your sale.
Confirm that your business financial records and legal documents are accurate and up to date.
Do a deep dive into your performance, your people, and your processes and make improvements that will position the business for growth — making your business more attractive to prospective buyers.
Find Your Buyer
Who is going to buy your business?
Make a list of potential buyers, including family members, current managers or employees, and competitors, to discuss with your business transition team. A private equity firm or strategic buyer may also be viable alternatives.
How do you protect confidentiality? Develop minimum criteria for releasing confidential information.
Always use a confidentiality agreement for all prospective buyers.
Structure the Transaction
What does a successful transition look like to you? Stay committed to structuring the transaction that meets your criteria and achieves your goals.
Is a stock sale or an asset sale more desirable? Engage your CPA to calculate the net proceeds, after any debt payments and expected tax obligations, to help you determine the sales price you are willing to accept under either circumstance.
Contemplate What Role You Will Have After the Sale
Do you want to stay with the business, make an immediate departure, or something in between?
If an earnout or deferred compensation is part of the deal, how can you best ensure financial targets are met to maximize your overall proceeds?
There’s more than one way through a business transition. Consider whether you desire to remain in the business as a full-time or part-time employee or to maintain an ongoing consulting role.
This may influence your decision as you consider potential buyers.
The transition
The successful handoff of your business to relax and retire may sound like a dream, but have you considered what your life will be like after the sale?
Have you given thought to your personal post-exit plan?
As a business owner, much of your time over the years has been committed to building and running your company — and will be especially so in the timeframe leading up to the pinnacle of the sale.
With the summit reached, many former business owners feel somewhat stranded after the sale.
To minimize that foreboding “now what” sentiment, take some time before the sale to reflect on not only what you will retire from, but also what you might like to retire to.
To learn more about this experience firsthand from former Wells Blue Bunny family business owners Mike and Cheryl Wells, watch this episode of the Sioux Falls podcast “Common Cents on the Prairie.”™
The takeaway
Preparing to sell your business can be the start of a great new adventure.
That being said, there’s a lot to consider before, during, and after the sale.
By working with a trusted team of advisors, you can help set yourself up for continued success beyond business ownership.
At First National Wealth Management, our goal is to support you through all facets of this process. We would welcome the opportunity to serve you through your business transition.
Give me a call at (605) 335-5189 or reach out here to start a conversation. We’re happy to help!
