IS IT TIME TO SELL YOUR BUSINESS?
In the beginning
Starting a business is exciting, offering the opportunity to fulfill your dreams of entrepreneurship and make a meaningful contribution to many stakeholders. Through your arduous work, diligence, and perseverance, (e.g., blood, sweat and tears), your business is nurtured by you and becomes an extension of your family often referred to as ones “Baby”. Every waking hour, your thoughts are on the business. Will we make payroll? How will we beat the competition? Are we innovating? Are we satisfying our client’s needs? Do we have the right team members to carry out our goals and goals on our team? All these questions and many more need to be thought about and answered daily.
Time changes things
Over time, one’s attention to detail to continually grow a profitable business becomes redirected toward how to monetize and realize on the value you have created. While coming to grips with your emotions and mortality will take time for adjustment, selling a business can be a highly rewarding personal experience. According to an Inc. Magazine article, the number one reason people sell their business is due to illness. Still for others, it is simply time for a change. Sometimes the business isn’t fun anymore.
Realizing on your value
Wanting to exit gracefully after a lifetime of work and continues investment and pursuing one’s retirement dreams is reason enough. Other times owners consider selling their business when the opportunity for liquidity is highest. There is tremendous “Paper Value” in a profitable business, but no true realization of that “Paper Value” until you sell it.
Consider your asset allocation
For most successful business owners, the business represents the most valuable and largest single asset in their total portfolio after their residence and some other securities or real estate investments, keeping such a sizable portion of one’s net worth tied up in an illiquid asset as your business needs to be discussed with your financial planner and may no longer suit your risk profile as you aged and reach the horizon of your business career.
Preparing for a successful sale
The preparation and planning in selling your company is not always as straightforward as one would think. Depending on the industry, nature, market and legal structure of the business, there is much to consider and prepare before the ability for a business sale can be realized. To prepare for an eventual sale, it is wise to have your financial planner or wealth manager, accountant, lawyer, and tax advisor engaged in the process as early as possible. having a team of sophisticated professionals on your side who know your personal situation along with the ins and outs of preparing your business for sale will help you to get the best return from your families most valuable asset.
Understanding the stakes are high
For most people, selling their business is something they only do once in their life so there isn’t a lot of practical real live personal experience or room for false starts, trails and errors. Its never good to make a poor first impression and selling your business is not a time to learn how to do something new given the stakes are so high if a mistake is made. Although many business owners are do-it-your-self-er-s, challenged the status quo and have been successful through their careers as entrepreneurs because of their self-reliance, strong will and dogged determination, selling your business should not be something you attempt without a trusted professional advisor network.
Experts will pay for themselves
When it finally comes time to selling a business, there is another professional you need to bring onto your team of professionals to secure the highest value and realize the most for the business. Your choice of professional highly dependent upon the sophistication, complexity, and size of business you are now ready to sell:
• Business Brokers -Typically focused on local, simpler, smaller owner operated businesses or “Main Street” business and franchises with revenues less than $3 million • Mergers and Acquisitions Advisors - best suited for selling profitable lower middle market business too sophisticated for a Business Broker and too small in enterprise value to justify the larger fees of an Investment Banker who doesn’t have the time or interest. • Investment Bankers - typical focused on larger and more complex private and public national or multinational businesses with revenue greater than $50 million.
Regardless of business size, there are a myriad of issues to consider and negotiate. Expert advisors will more than pay for themselves as they help you optimize your tax, regulatory, financial, and personal situation.