For business owners considering selling their business, understanding what you need from a sale to meet your personal goals and objectives underpins context and starting point. Answering ‘what is my company worth?’ is as important as ‘what’s the money for?’ Time is your most valuable currency; however, it must be productive and efficient. It’s time to take a serious look at your future finances, put your business in a position to sell, get help from advisors and execute your plan.
Step 1. Square up your personal finances
After years of focusing on building your business, now’s the time to evaluate where you are financially. What are your assets and liabilities? How much income are you accustomed to and what are your spending habits? Approach these questions with the same discipline without BS that got you this far. Map these items so you can see the picture clearly without overwhelming yourself. We want you to create a plan that makes sound financial sense.
What are your post-sale plans?
What’s important to you? What do you want your life to look like after your business sells – volunteer, charitable giving, travel, etc.? What’s the money for? Your answers will help you better understand what you must have from a business sale to meet those objectives. There’re several advisors you will need to draft to help guide you to achieve those objectives.
Work with an advisor who can help you identify and prioritize your goals and objectives while helping you connect the financial details to your bigger picture. We quarterback your advisory team – Financial, Wealth, Tax and Legal – for you ensuring the right team is assembled and aligned with your goals and objectives. We help you translate your success in running a business to success in meeting your needs post-sale, ensuring you understand your options and confidently make the right decisions for your wealth.
Step 2: Engage JScott Partners
An M&A Advisor will guide you through the process from start to finish. Whether you choose us or someone else doesn’t matter to us. Gaining sound, practical insights on your unique situation is wise. You’re THE expert on your business and that’s how it should be. We’re the experts on selling your business for the highest price possible. Don’t waste time and energy trying to figure out the process on your own. Our assessment is designed to provide you with enough data and insights to crystallize your current state, fully evaluate where you are and where you want to go in making an informed decision to commit to a sales process.
What’s my business worth?
There are many different potential deal structures. As your M&A Advisor, we listen to what’s important to you in terms of the involvement you want with the business post-sale and your personal financial needs to help you discern your options. We also help you with a valuation from our own NAVCA certified professionals. You don’t know what you don’t know. How do you know if you’re ready to sell if you don’t know what a buyer is willing to pay for it. Eliminate the anxiety of the unknown with a seasoned professional who can help you extract the most value from your sale.
A higher valuation range gives you an advantage in negotiating with any buyer. A lower valuation range suggests we have some work to do in fine-tuning financial and operational metrics to increase revenue and earnings growth. If the valuation is consistent with expectations, you may want to rollover some equity to have a second bite of the apple.
Our goal at JSP is to get you the highest price possible. If we have work ahead of us to achieve that target, we help you set your company up for success putting it in the best position possible to sell by:
- Square up the financials; accrual basis, in accordance with GAAP, normalized
- Advising you on selecting an M&A attorney, a Wealth Advisor, a Forensic Accountant and other professionals where specific advice is necessary
- What target market does your brand appeal to? What’s your brand heritage/story?
- What are the unique attributes of your products/services/brand?
- Do you have a proprietary method? What technologies/patents do you have?
- Do you have any endorsements or awards?
- Identify and evaluate potential buyers and coordinate due diligence
- Creating a teaser for potential purchasers outlining why they should buy your business
- Create strategic sales path focused on critical growth metrics
- Ensure your market is defensible and your customer concentration is balanced
Identify your most compelling differentiators and use them to create your unique story. No one knows your business better than you! Presenting your business as the most attractive opportunity with a level of sophistication will appeal to potential buyers.
Step 3: Plan for taxes
Get a handle on your cost basis to project the amount of cash you’ll be left with post-sale. Too often business owners forget proceeds are taxed above your cost basis as long-term capital gains. But as with anything, your taxes will be highly dependent on your personal circumstances and the details of the transaction. The chosen financial advisor will help create realistic plans for life post-sale personalized to you and proactively address any liabilities.
We concurrently advise our clients in planning for your post-sale life also. Part of the decision to sell should be grounded in knowing the proceeds will be enough to fund your lifestyle. Our pre-sale planning with you reveals the after-tax amount needed to fund a long-term investment portfolio accomplishing your post-sale lifestyle objectives.
Make time to plan.
A savvy business owner understands his tax burden and does everything legally possible to avoid overpaying taxes. However, we need to review current tax position during the financial tune up ensuring you’re not shooting yourself in the foot. Tax minimization strategies take time to plan. Having conversations with your CPA, financial and wealth advisors early in the process about your options is vital.
Making time to plan ensures clear communication and decisions you’re comfortable with and gives you the most options. The more time we plan before a sale the better. When we encounter last-minute decisions from owner clients, it usually results in no or poor actions being taken. You’re going to have to set aside cash from proceeds to pay your tax bill.
Step 4: Tune up your estate plan
We advise our clients to not use ‘set it and forget it’ strategy when it comes to estate documents especially with a business sale. Depending on your earlier answers to the question ‘what’s the money for?’, make it important to update your estate plan before a sale occurs. If there’s a goal of creating multi-generational wealth, then we recommend adding a Trust and Estate Attorney to our team to carefully plan for this new liquidity. Even if there aren’t any trusts to fund pre-sale. You may want to adjust provisions in existing documents to be reflective of your new or soon-to-be liquid net worth. We help you break down the overwhelming complexity by ensuring your assets end up in the right buckets.
Step 5: Execute your plan with your team of advisors
Shifting your mindset from that of a business owner to a business seller is vital. You’re the General Manager of Your Team, Inc. We help you draft the skill players necessary to achieve your personal and professional goals from a sale. Money is only a tool to achieve those goals and objectives. Executing a blueprint for your path forward includes:
- The types of accounts you need to open to receive the sale proceeds, how they should be titled, and how they will be funded according to your goals and objectives
- How your needs will be met? Will you be living off the portfolio? What do you need from your transaction proceeds, and how to invest them? What unique circumstances influence your plan decisions? Your plan is different from everybody else’s.
- Ensure your taxes are paid in a timely fashion.
- Take time to enjoy your life’s work and determination have afforded you!
- Have a plan for things you want to enjoy post-transaction, e.g., new hobbies, travel, and time with friends and family.
While this checklist is not exhaustive, these 5 steps provide actionable insights whether you choose to sell your business now or later. Diligent planning is critical and we’re here every step of the way to help you develop and execute and build a plan. The above is just a skeleton of some preparation steps. If you’ve put off strategically planning for the sale of your business until you’re ready to retire, you may want to consider staying at the helm for a few more years. This timing will help you to adequately plan a transition for your company and people to flourish. Your company is your legacy whether it stays in the family or not.
Are You Ready to Sell Your Business?
Our initial conversation is complimentary, confidential and we’re not going to sell you anything. You need an impartial sounding board regardless whether you invite us to help you or not. We will listen intently, give you an honest answer of what your business may be worth, why we believe that, what you can expect from a sales process to achieve your goals and objectives.
Your first step is to simply ask us. Thank you for considering JScott Partners.