Three Steps to Take Before Selling Your BusinessRamon Ray
The thought of selling your business is daunting. You’ve put years, maybe even decades of your life into it. So how can you be sure you get the highest return on your investment? A solid exit strategy will equip you with the tools to make the best possible transition. The best thing you can do is start preparing your business now for the transition so when the time comes, you’ll feel ready for the next phase of your life. These three steps will help you navigate the process.
Prepare the Business for Sale
First, you’ll need to examine whether your business is in the best possible position for sale.
You want to be sure of its enterprise value after you leave. Would the company still be profitable without your day-to-day contribution? If the business’s success is dependent on you, there will be little else for investors to purchase. You may realize you need to grow the business in new directions. If your company offers professional services, you’ll want to focus on strengthening processes and the trusted business relationships that go along with them. A certified exit planning advisor can help you make these decisions. Ultimately, you’ll want to make sure the company’s revenue is predictable year to year, there’s a succession plan in place, and you have a good risk management system. In other words, by the time of sale, your business should run well without you.
Financial Planning – Timing Matters
Once you’ve decided to sell, you should next figure out how much money you’ll need when the business income is gone.
This is especially important if you plan to retire after the sale. Know the number required so you can live comfortably for the rest of your life. Financial advisors can help you figure this out, as well as a plan for structuring your income post-sale so you feel secure in your retirement.
The right timing is a critical part of maximizing your financial return. A full transition can take years, so if you’re planning to retire, you’ll want to act while you’re energetic enough to see the plan through. And pay attention to market forces. It won’t surprise you to know there’s more private capital available when the economy is good. If the market takes a downturn, you might wait to sell. Or there may be times when you want to move quickly. For instance, some people expect an increase in capital gains taxes during the Biden administration. If you were planning to sell in the next couple of years, it could be a good idea to move ahead sooner to avoid possible new taxes. Prepare yourself financially and you will be ready to strike when the market is hot.
Plan for Your New Life
The third and final part of your plan are your personal goals.
This is the area people tend to overlook the most. If you’ve spent years wrapped up in your business, how will you spend your time once it’s sold? What do you want to do next? How will you see yourself if you no longer have your work identity? Most business owners who regret selling do so because they hadn’t put enough thought into the next phase of their lives. Have frank conversations with your family. If you had hoped the next generation would take over the business, make sure they really want to. You don’t want to see your business fail because its new leader would rather do something else. Make the emotional preparations for selling your business so you feel good about moving on.
Under the best circumstances, an exit plan takes several years to complete properly. Think about your strategy as early as possible and get professional advice to help you through the process. With the best preparation, you’ll be able to make a move when the timing is right for you and your family.
Mark Kravietz, Managing Partner and Founder, ALINE Wealth
PS - Want more attention, and more impact, and more sales for your business? We created a complete Personal Branding Framework for business owners just like you... get it here.