Things To Consider Before Selling Your Business

"Everything you've ever wanted is on the other side of fear." -George Addai

Authors: Janet I. Behm, Nate Hagerty, Copilot, and Grammarly

Revised from a blog of the same name, published in August 2021

5-Minute read

• Business is Good

• What's Your Story?

• Get What You're Worth

• More Landmines

• Get Support From Your Pros

• Stay the Course

• Have a Plan

Business is Good

You've put in the years, labored long days, sweated through the bad times, and high-fived in the good as your business grew. Now, it looks like it's time to step away into the next life stage, slay the next dragon. It's time to sell. (You think.) Are you headed to another career or a seaside retreat?

Get what your business is worth before you walk away. Because if you're not careful, you won't.

And, there are TAX implications that will come into play if you're considering this. Your entity structure can make a big difference in what is possible. Consider what entity formation you're operating under; if you have this in mind, contact your tax strategist. These details have an impact!

And one more thing before I dive in... Wednesday, September 15th, is the due date for third-quarter estimated taxes. If you're reading this, and it's already past ... don't fret, just pay it now ... there'll be some small penalties, but nothing crippling. The idea is to avoid LARGER penalties if the clock continues to tick.

What's Your Story?

When you've been in the grind of running your business for a while, there inevitably comes a point where you begin to daydream about selling your business and moving on. The funny thing is, the actual sale can often show up right out of the blue. And since that's true, you don't want to be caught off guard by a lack of preparedness.

What would you want to see if you were the prospective buyer? (Solid numbers, for starters.) How do your assets compare with your liabilities? What's your income stream? Make sure your annual financial statements are on hand and up to date, showing your financial position, cash flow, and operational expenses. Have a professional (someone like yours truly) audit your financial statements going back about three years – which makes for a good-looking record, complete but not too long, especially concerning your profits.

Remember to include more recent financial info, like recent loans. Have you had any recent supply chain troubles that might have affected your business? These are important factors that potential buyers will want to know about. This process lets you spot and highlight your best numbers for an eventual buyer. More importantly, you can find and fix any money or tax issues, because nothing can kill your deal faster.

Get what you're worth.

It also puts you in a position to talk up how you beat your competition. By the way, you'll want industry standards on hand to show how your business stacks up – these are benchmarks that reflect the typical performance of companies in your industry. They can help you negotiate a reasonable sales price.

What if some of the numbers aren't great? Then admit it. A buyer worth your time isn't going to expect perfection in your operation, and it's way better that they hear about a problem from you now than unearth it in their due diligence.

The buyer doesn't want any surprises during this sale process. You want them even less.

More landmines

Your books are only the start when getting ready to put your business on the market. Here's what else to do. Make nice with the taxman. Tax troubles are another surefire deal killer.

If you have any doubts about any of the tax jurisdictions you deal with – your state or the dreaded IRS – make a call to see if you can confirm that your tax history with them is squeaky clean. Be sure all of your filings and payment obligations are up to date. Keep your tax preparer in the loop, which leads us to the next possible trip-up.

Get Support From The Pros

It's crucial to seek professional help when selling your business. This is one of the biggest deals of your life, and you shouldn't risk tackling it without the assistance of a lawyer and/or tax expert. Remember, your buyer is likely to have more knowledge about this process than you, especially if they have their professionals advising them. So, don't go it alone. Seek the guidance of experts to navigate this complex process. Ditto with marketing the business sale.

Without experts to help, you might find yourself with fewer potential buyers – and you definitely don't want that. Years ago, I was a Business Broker (member of the International Business Brokers Association [IBBA]). So, I know a thing or two about staging a business and negotiating.

Your employees aren't leaving, remember? Do you have key people right now that the business is going to want to keep? Talk early and often with a prospective owner about how to retain those folks.

Sweeten the pot? This one gets overlooked a lot: If you've got a major account that depends on just you, groom an employee now to take it over. Your buyer is going to want to know that losing you doesn't mean losing that account.

Stay the Course

Remember, even amidst the excitement of a potential sale, you still have a job to do. Don't let the prospect of a big deal distract you from the day-to-day management of your business. It's essential to maintain your focus and commitment, as neglecting your current operations won't impress the potential buyer.

Keep your business running smoothly, even as you navigate the sale process.

Have a Plan

Are you ready for this move? How exactly does the sale fit into your plan? Let's say you aim to retire. Are you ready emotionally to leave the rat race? Got a plan to fill your suddenly free days? And whether you plan to kick back or immediately go into another business, is this sale going to net enough to meet those goals?

This could be one of the biggest things you've ever done, so take the time to think through and prepare for it -- and find a professional you can trust to walk you through the process.

This weekly blog is always here to help you… and your business.

BE THE ROAR not the echo®

Warmly, Janet, the Tax Wizard