Author: Laura Troshynski, Senior Director, Business Owner Advisory Services
Selling a business is a complex venture. Whether you profit from the sale is dependent upon several factors, including planning ahead. The following information will provide some high-level tips on selling your business to help you meet your goals and maximize the value of your company.
Preparation Starts Earlier Than You Think
A survey conducted by BizBuySell found that the median sale price of small businesses grew 16% in 2021. The survey suggests that buyers were willing to pay a premium for valuable business opportunities. However, realizing the same outcomes for your business sale will rely heavily on how well you prepare the company to change hands.
If there is one common oversight that small- and mid-sized business owners make, it’s that they start preparing for the transition of their business too late. Selling your business requires advanced planning to identify and implement the strategies that will maximize your company’s value while still protecting current earnings.
According to the BizBuySell survey, businesses that sold in 2021 were those with strong financials. With this in mind, it’s key to remember that the decisions you make 5 years before a potential sale could have a strong impact on how easy it is to sell your company and how much you will profit from it when you do. For example, taking advantage of certain tax deductions today may help the business to realize more revenue but may shave value off the bottom line, a factor that could hurt your business during the valuation process.
To ensure that you consider all of the intricacies that are part of the business sale and have time to take appropriate actions, you’ll need to start early by establishing a network of advisors. A transition team typically includes an attorney, accountant, financial advisor, a business broker and your commercial banker.
Together, this team of professionals can identify the financial documents you will need to sell your company, prepare the business fiscally to optimize value, advise you on structuring a management team to support your decisions and prepare for a successful sale.
Consider the Emotional Consequences
While business owners may approach the sale of their life’s work with optimism and enthusiasm, it isn’t uncommon to hit emotional roadblocks along the way. To ensure the best outcomes, think about how the sale will impact you emotionally before beginning the process and make sure you are really ready to leave the running of your company to someone else.
Some experts suggest envisioning the worst-case scenario. How will you feel if the new owners are not successful and run your company out of business? Considering how you might respond will give you an idea of how ready you are to transition from business ownership.
Former owners who have been through the process of a business sale advise others to also prepare for feelings of remorse along the way. Whether it’s a feeling that you’re abandoning dedicated employees or sadness over leaving what has likely been a life’s work, these feelings are natural and can be best handled by re-examining your reasons for selling in the first place.
Maybe you’re willing to let your business change hands because the line of work has become boring, because of partnership disputes or maybe you’re ready to retire. Remembering why you set out on this journey will reinforce your resolve.
Finally, spend some time thinking about what you will do with your days and nights after selling your company. Running a business requires a high level of commitment and time from owners. Planning ways to fill those empty hours after the sale is complete can ease the emotional implications associated with selling your business and set you up with a positive outlook for the future.
Final Thoughts on Transitioning Your Company into New Hands>
Once the plans are in place and an owner has come to terms with the emotional implications of a business sale, most are excited about the prospect of the new journey ahead. However, it’s important to keep in mind that selling your company for an optimized value is not a process that will happen overnight. Prepared business owners will be in the best position to achieve a favorable sale result and to also deal with the emotions associated with selling a business.
About the Author
As the Senior Director of Business Owner Advisory Services at FNBO, Laura brings her experience working with business owners, and as a former member of a family business, to the Business Owner Advisory Services team. With an extensive background in business and estate planning, Laura is well qualified to help others plan for business transitions.
