How to sell your business without regrets

For business owners, selling a company represents the pinnacle of their entrepreneurial journey: someone wants what you’ve created and is willing to pay for it. But realizing the full potential value of a business requires more than just finding a buyer. This requires strategic preparation, careful planning and guidance from experts such as a Certified Exit Planning Advisor (CEPA).^®). A CEPA is a financial professional trained to help business owners develop a customized exit strategy unique to their particular circumstances.

Exit Planning Institute (EPI) has developed a methodology for accelerating value creation that allows business owners to develop and protect the value of their business while planning its transition. The model combines three components: value growth, value protection and value transfer. CEPA experts are trained to help clients maximize business value at every stage of ownership and exit planning.

If you’re a business owner, conduct an annual review with your financial professional to track progress and identify areas for improvement. This proactive approach ensures that you are always prepared for a potential sale, whether planned or unexpected.

Subscribe to Kiplinger’s Personal Finance

Be a smarter and better informed investor.

Save up to 74%

Sign up for Kiplinger’s free e-newsletters

Profit and prosper with the best expert advice on investing, taxes, retirement, personal finance and much more – straight to your e-mail.

Profit and prosper with the best expert advice delivered straight to your inbox.

Now let’s look at the basic strategies that can help maximize the value of your business before selling it and help you cope with life after the sale.

Add value to your business

The most important first step in preparing your business for sale is increasing its value. Potential buyers are looking for strong financials, but they also want a business that can operate efficiently. without owner. We call this “decentralizing the owner” from the business. You want your business to be able to run smoothly with or without you.

Consider improving operations by hiring or partnering with top talent, implementing more streamlined technology, or automating routine processes. Diversifying your most effective revenue streams and focusing on what increases revenue will also add value, as opposed to depending on a single source of income or wasting time and energy selling products that don’t increase. profitability of your business.

An internal audit should also be conducted to identify inefficiencies. In order for problems to be solved effectively, it is important to be true to yourself and get honest feedback from your team. It’s also critical to evaluate the company’s culture and see where management can intervene to improve the lives of employees. Happy employees tend to work harder, stay with the company longer, and are more loyal.

Minimize tax liabilities

Selling a business can have significant tax consequences. minimizing tax liabilities vital to retaining the majority of sales revenue. When structuring sales, strategic tax planning is critical. It matters whether the company is S CorporationC corporation OOOpartnership, etc. It matters whether it is a sale of assets or a sale of shares. It is also critical to start thinking about tax strategies that can help reduce capital gains. There are many strategies out there and they change from year to year, so it’s important to work with an advisor who keeps an eye on the most viable strategies available.

Start your tax planning early by consulting with a tax advisor three years before you plan to sell, if you are able to do so. They can help you explore options such as reducing your taxable income by deferred compensation plans for key employees, which not only reduces ongoing taxes, but also incentivizes staff to continue working after the sale. They can also help ensure that your facilities are configured correctly to use the best strategies at the time.

Succession and succession plan

One of the biggest concerns for potential buyers is whether the business will continue to thrive after the owner leaves. A strong succession plan, including developing a strong management team, will ensure that the business can continue smoothly without you. Buyers will value a company with experienced and empowered leaders more highly.

Identify potential successors early—internally or externally—and begin grooming them for leadership roles. Design your succession planning in writing to show potential buyers that there is a clear path forward regardless of your departure.

Time for a parachute – when is it time to sell?

Timing can affect the success of a business sale. It is important to evaluate both market conditions and your personal readiness. Waiting for the market to be in your favor certainly makes sense, but it is equally important to understand your personal financial, emotional and health needs.

Don’t wait until a personal crisis to decide when to leave the company. Instead, plan strategically by analyzing market trends. For example, if you notice industry consolidation or high demand for businesses like yours, you may want to try to sell them during this period to secure a higher valuation.

Determine your post-exit strategy

After a successful sale, many business owners are faced with the challenge of managing the new influx of wealth. The transition from business owner to retiree (or entrepreneur of a new venture) requires significant financial planning to ensure long-term security. Start creating a post-exit financial plan as early as possible. This may include diversifying the proceeds from the sale into investments that provide long-term growth and income.

In addition to deciding what to do with the money after the sale, business owners also have to decide what they are going to do with themselves. Don’t wait until the end of the sale to think about answering the question. what now? Start thinking about whether you want to retire completely, invest in new ventures, or focus on personal passions. When interviewed, 76% of business owners said they regretted selling their business within a year of leaving—which is why you need to make sure you’re mentally and spiritually prepared for life after the sale.

The Five Ds: How to Avoid Forced Exit

Unexpected events such as death, disability, divorce, disagreement or disaster are the top five factors that can force business owners into an unplanned exit. Having contingency plans in place can protect your business and ensure you don’t lose value during a fire sale.

Provide legal and financial protection to protect against the 5 Ds. This includes knowing the value of your business, creating a leadership team, keeping key people informed. sales contracts and building emergency reserves that will allow the company to weather financial storms. Prepare for the worst-case scenario so you can exit the business on the terms you prefer, not because of an emergency.

Giving meaning to heritage

Many business owners assume their children or family will want to take over the company, but often this is not the case. Make sure you’re realistic about what your heirs want—whether they’re involved in the business or not—for a more effective exit.

Have an open and honest conversation with your family about their long-term ambitions and understand that they may prefer to inherit the proceeds of the sale to pursue their own dreams rather than continue theirs. Incorporate their feedback into your planning to structure a sale that benefits everyone.

Bottom line

Leaving your business is one of the most important financial decisions you will ever make. By taking the right steps to increase its value, planning for taxes, ensuring succession, and timing your exit correctly, you can ensure the security of your legacy and your financial future.

Working with CEPA^® can help you navigate this complex process, leaving your business in a stronger position than ever. And don’t forget, you will one day exit your business.

This article was written by and represents the views of our consultant and not the editorial staff of Kiplinger. You can check consultant records using SEC or with FINRA.