While your primary objective when selling your business might be to obtain the highest value, there are other aspects to consider.
Answering these questions can help you prepare for the full impact of a business sale.
Are you ready to sell?
It’s important that the sale of your business occurs at a time that makes sense to you. You need to determine when you will be ready to “let go” of the business and allow someone else to take charge.
Some factors to keep in mind include:
- Your life plans: How will you fill your time when you no longer have to center your life on your business?
- Your legacy: Are you confident that a buyer with the right knowledge and expertise can lead your business effectively and protect your company’s reputation after your departure?
Who are the stakeholders?
The decisions you make when you’re actively running a business affect key stakeholders. The same is true when you’re transitioning out of a business.
Possible stakeholders could include:
- Family members: Are you sure all dependents will be left in a good financial position after you sell the business? Consider potential strains on any relationships with ties to the business. Make sure everyone is treated fairly in any wealth transfer strategy you pursue.
- Employees: People who work for you, particularly those who have played important roles in your success, should be considered in your sales plan. Will their opportunities be affected if you sell the business to a third party?
- Community: Is your business an important establishment in your local area? Think about whether the sale could have an impact on the workforce, vendors or others who directly benefit from it.
- Clients and customers: They may not expect changes in their service as ownership changes. You’ll want to try to preserve those relationships as you plan the transition.
The best strategy will address the concerns and needs of those affected by a sale.
What are your objectives?
Your goals for both the sale of your business and its future will influence how you structure the transition.
Here are some considerations to work through:
- Valuation: Factors such as the potential market for your company, its current operating level, the quality of the leadership team in place and the strength of your customer base will all play a part in determining the true worth of your company.
- Employment status: If you want to stay involved in the business, you could consider an employment contract with the buyer. The same contracts could be used to protect the employment status of others in the organization.
- Tax impact: Tax liability can vary based on whether you sell stock or assets or whether you receive substantial payments under an employment contract or a noncompete agreement. Transfer taxes may also apply if you transfer ownership to a family member or charity in advance of the sale.
- Future owners: If the business is moving into the hands of children or grandchildren, events such as divorce or other asset claims could impact the business and your potential legacy.
Who can help?
Managing all the elements of selling your business is critical to your long-term financial security. It may require the support of advisors or specialists who can contribute additional insights to the process.
You will want to consider:
- Your accounting, legal and tax advisors: They will be most familiar with your business and your personal interests and goals.
- Valuation professionals: An outside valuation service may be able to provide a more objective perspective.
- Legal professionals: Attorneys with experience in business transactions or taxes will be beneficial in addressing deal-related issues.
- Investment bankers: Investment bankers or business brokers will market your business to a large group of potential buyers and represent your interests in the transaction.
- Trustees: If a portion of the company is owned by an irrevocable trust, an individual or corporate trustee needs to be able to step in and oversee key responsibilities.
- Business Owner Advisory Services from U.S. Bank Wealth Management: An advisory team that can help you frame the issues, evaluate options, establish a timetable for action, and make sure the process goes smoothly.