Four important lessons on what you need to do before you think about selling your business

Whether we like it or not, summer is pretty much over. The kids are all back at school, and the rest of us who aren’t in school have gotten back to our normal routines. While business transition planning may be the last thing on your mind as you ease back into the swing of things, this is actually a great time to start planning – especially if you’re thinking about selling your business in 2018 or 2019. So, what better time to start to get yourself educated!

Here are four key areas you want to consider as you think about selling your business:

1. Determine your Wealth Gap or how much you need to NET from the sale of the business:

In many cases, owners will be depending solely on the proceeds from the sale to fund the rest of their lives. However, many owners discover too late that their Wealth Gap is larger than the expected proceeds from their business sale.

2. Understand business value and what buyers are looking for:

Owners often do not realize there can be more than one value for their business at any given point in time. Different transition options can result in different transfer values. A business, therefore, can have a range of values, which must be determined at the outset. In addition, potential acquirers may have a very different idea about the value of a business than the owner.

  • Lesson: You want to make sure that you understand all the facets of business value, determine where there are shortfalls, and make improvements so that you can best position your company for sale. Key factors such as lack of dependence on the owner, diversified customer base, growth opportunities, reputation, and indus­try leadership are some of the many intangible qualities buyers are looking for. See: The Disconnect Between Owners’ and Buyers’ Perception of Business Value

3. Learn about all of your business transition options:

Like many owners, you may think that selling to a third-party buyer is your only option. Actually, a third-party sale can be the most difficult to achieve and may not satisfy your financial and non-financial objectives. You may have more options than you realize, including a number of internal sales options. It is critical for owners to understand how different transitions can be structured to minimize the taxes. Some internal transitions may be even more tax efficient than a sale to an external buyer. Determining which option is appropriate for you and your business requires an analysis of your current situation while considering your future financial and non-financial goals.

  • Lesson: Make sure that you understand all of your options before you jump into anything. Learn what’s required to help you make the right choice through a comprehensive, holistic business transition planning process. See: 5 Most Common Options for Selling Your Business

4. Get help and put together an experienced advisory team:

There are myriad aspects to consider and serious decisions that will need to be made, and not having the right team in place could cost you. You’ll want to work with professional advisors who specialize in business transfers and have the expertise to manage all facets of your transaction.

  • Lesson: Your advisory team may include a variety of professionals throughout different phases of the transition process. If you are planning an internal sale, the advisors needed will be a bit different from those for an external sale. At a minimum, your team should include a business transition advisor, a CPA with experience in tax planning for business transfers, and for an external sale, you’ll also want to work with a business intermediary (business broker or investment banker) and a business transaction attorney. See: The Benefits of Partnering with a Business Transition Advisor

These are just a few starting points that you’ll want to look at as you start on your business transition planning journey. Proper planning requires sufficient time to craft the desired outcome. It is an enlightening process and can provide you with direction and a real vision for your business, identify opportunities for growth, and determine areas that may need improvement. Most importantly, it can help you develop a strategy that will help you achieve your short- and long-term financial and personal goals.

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