Thinking of selling your business? As it turns out, you’re not alone. One study1 suggests 73% of owners plan to transition ownership within the next 10 years. Yet despite high intention, less than half of those looking to sell have a formal plan or a team in place to guide the sale.
Understanding a few key steps in the process can contribute significantly toward a smooth and successful sale process.
Step 1: Develop a realistic timeline for the sale of your business.
Smaller businesses may sell in a few months, while larger, diversified businesses may have a much longer timeline.
- Depending on the size and complexity of your business, exit planning should begin well ahead of the desired sale timeframe to maximize value and prepare the business for the transition. Some initial actions include:
- Establish a baseline business valuation to track improvements.
- Examine your financials, your people, and your processes to increase the value of the business.
- Review all leases, contracts, and licenses to make sure they’re transferable.
- Consider who your buyer may be (e.g., a family member, a competitor, or a private equity group).
- Evaluate market conditions to plan the timing of the sale.
The better prepared you are at the start, the smoother the process is likely to go!
Step 2: Build your advisory team to assist with the sale.
Surround yourself with a trusted team of advisors who can help you build a tax-efficient transaction and a smooth transition that supports your goals leading up to and after the sale.
- Each advisor brings a unique skillset to your business transition team. Depending on your circumstances, you should consider:
- a valuation expert to determine the worth of your company,
- a CPA to recommend a structure for the transaction to optimize tax,
- a business attorney to draft and negotiate legally compliant documents related to the sale,
- an estate planning attorney to ensure your estate planning documents are in order before negotiating with buyer, and to reflect the new financial reality after the sale, and
- a wealth advisor to act as the strategic quarterback, coordinating the transition team to ensure that legal and tax strategies are aligned with your overall wealth management and legacy plan.
Step 3: Consider what your life looks like after the sale.
Are you planning to fully stay on to assist with the transition, work in a reduced capacity within the business, or completely step away from the business? Your answer to this question may help determine your buyer.
As a business owner, you’ve likely devoted your working life to create and build your business, so you owe it to yourself to plan not only for its sale, but also for your next chapter.
Consider your purpose in this new phase of life. What is it that you might like to retire to? Do you plan to travel, volunteer, or take up a hobby? Do you hope to spend more time with family? Rather than retiring from work, by approaching your next chapter with intention, you can retire to a life of new adventures.
If you’re thinking about selling your business, there’s no better time than now to begin preparing. Contact us to start a conversation and to learn more about how we can strategize with you during your business transition and beyond.
(1) According to the 2023 National State of Owner Readiness Survey, conducted by the Exit Planning Institute.
