You’ve spent your life becoming the high-achieving entrepreneur you are today – congratulations on your success! Most people don’t ever even start a business, let alone run a successful one for decades as you have.
But now, you’re ready for new challenges. Perhaps you’re looking forward to retirement, spending more time with family and friends, taking time to smell the roses, traveling. Or maybe even starting another business. Or any combination of these and all the other options available to you due to your success in life.
Let’s say you are an entrepreneur with no partners, and your children have their own lives; they’re established in other fields than yours, and you’ve been thinking about selling your business to provide you with the freedom to soar into new skies.
Generally speaking, it’s best to start getting your business ready for sale before you are ready to sell. Maybe as much as two or three years in advance – though best of all is to start planning your exit when you open your business. However, there’s no time like the present, and there are a few general guidelines we will outline below.
Selling a closely held business is a multi-phase process, which can take years to pull off successfully. Phase I is getting your business ready for sale – and getting yourself ready to sell the business. Often, closely held business owners find it difficult to let go. That’s an emotional reaction, perfectly human and completely understandable, when you find yourself on the brink of relinquishing control of this, your “baby.” But, just as one day you must let your children live their own lives, sometimes you must relinquish “baby” to move on with your next stage of life.
Your first steps should be to ensure your business runs smoothly – a self-managing concern that can thrive without your day-to-day oversight. Your business will be worth much more to a buyer if it doesn’t need you, personally – in fact, if it’s too dependent upon you for day-to-day management, you may never get an offer. At least, not one you’d even consider accepting.
Make sure you have documentation in place, or have someone (either a trusted team-member or an outside hire) put this in place for you, covering the details of:
Employees should be cross trained to cover one another’s job functions, because there’s no better way to ensure an emergency occurs than to fail to prepare for it.
Your team should be well-versed in each policy, procedure, process, and duty, as applicable to their functions as team members. This will make your business much more attractive to prospective buyers, as new ownership would be able to hit the ground running.
Speaking of teams, you will want to put one together to advise and support you through the selling process – you will likely need:
In some cases, you may want several attorneys, each specializing in a different aspect of the sale – for example, if you are including owned real estate in the sale, an attorney with a specialty in real estate law may well be needed. If your business owns intellectual property, such as patents, you may also need a legal specialist in that area. An estate planning attorney’s services are often invaluable when planning how to deal with the proceeds of a sale.
Conversely, if your CPA/financial planner is also versed in Transaction Advisory, tax, and financial and estate planning services, you may be able to bundle several roles into a single team player.
Some of the steps your Transaction Advisory Team may recommend could seem counter-intuitive – for example, moves you’ve made to minimize your tax liabilities may initially make your business look less profitable to an outsider than it should. To present your business and its financial picture in the most favorable light to potential buyers, you may, acting in concert with your Transaction Advisory Team, want to:
The above are only a few examples of strategies you and your Transaction Advisory Team may look at in readying your business for sale – God (and the Devil) are always in the details.
It’s also a good idea to consider the timing – is the current economic climate ripe for ensuring you get the best price for your business?
Working with your Transaction Advisory Team, you can maximize the on-paper value of your business and evaluate the timing of the sale. Be aware that what will work for one business may not work nearly as well for another – one size never fits all.
Selling a closely held business can take as long as two or three years, so if you are seriously considering a sale of your business in the near-term, now is the time to contact us and get started.
If you would like to get the process underway, or just want to explore your options with expert guidance, please click here to email me directly.
Until next time –