Sell Your Company

Business owners are a special breed. Their entrepreneurial spirit and drive to succeed means they are constantly challenging themselves, their employees, and even their families to set and achieve goals. When those objectives are reached, the bar is often reset even higher. Business owners gain satisfaction from solving problems, creating products and markets, devising new strategies, motivating the people around them, seeing things in a new light – even putting out fires. But there comes a point when it is time to exit their businesses. Exiting a business requires as much careful consideration as did starting a business; below are a few steps to contemplate before starting the exit process:

Navigating the Next Stage:

Visualization

What would the ideal exit look like? When would the ideal exit take place? What would you do with your time after the sale of the business? After fees and taxes, how much will you take away from the sale of your business? How many after-tax dollars will you require to fund a comfortable retirement?

Buyer Selection

Buyers generally fall into one of two camps: strategic or financial. A strategic buyer is one who evaluates how your business fits into their own long-range plans, while a financial buyer is more concerned with your company’s stability and profitability going forward. Strategic buyers are likely to pay more, particularly if you have products, intellectual property, market coverage or penetration, or some other factor that provides synergy. On the other hand, some financial buyers seek a rock-solid, well-managed enterprise that demands minimal oversight, while others seek out underperforming turnaround candidates. The options are plentiful. You will need time to sort through them all, arm yourself with all of the knowledge and information you can find, and work with experienced professionals. Preparation lays the foundation for all business success.

Valuation and Tax Planning

Every business owner wants to realize the highest price possible in contemplating a sale, but some begin to late in the game to capture the most value. What drives value? Buyers will come up with a price that reflects their perception of the amount of risk within your company relative to the return on their investment, usually based on future earnings potential. As such, increasing the value of your business means focusing on steps to reduce the risk exposure associated with ownership, while also taking steps to significantly boost the enterprise’s earnings and growth going forward.

Tax considerations have an enormous influence over how you sell your business. Corporate tax law typically drives the structure of a business sale transaction. It is imperative to have a carefully constructed tax plan and exit strategy prior to the sale of your business. Remember, the important thing is not the price at which your business sells, but how much of that price ends up in your pocket.

Deal Execution

Once you have settled on selling your business as the correct exit strategy, you must avoid the trap of focusing so heavily on transaction-related details that you neglect on-going operations. You need to demonstrate to the buyer that your company has continued to prosper while you were pursuing a sale.

With so much at stake, a deal team is vital. Critical deal members include: an investment bank, a CPA, a corporate lawyer, an estate planning lawyer and a business appraiser.

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