While business owners typically work years to build their businesses, the process of selling is often unknown territory. Without a roadmap to guide them, even the savviest may be vulnerable to making significant mistakes. Given the scope of planning necessary, having an overview can help you prepare to make the most of all you have created.

  • 0 %

    of business owners wish they had spent more time preparing for a sale1

  • 0 %

    of business owners spent two years or less selling their business1

The decision to sell

Ideally, you should begin the process of selling a closely held business a few years ahead of the actual sale. You鈥檒l want time to think through important considerations, including:

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Resolving family dynamics

For a successful sale, working through issues is critical. These can include:

  • The family identity is tied to the family business and a sale can present a loss of status or heritage
  • The business is the glue keeping the family together and it can be important to evaluate alternatives to a sale
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Analyzing the timing

Consider where the economy is in the business cycle. Selling a business in 2006 may have brought a high sale price, whereas it may have been hard to even find a buyer in 2009 or 2010.

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Assembling a team

This may involve expanding the advisor team in place or changing advisors if existing ones aren鈥檛 up to the task. The team can include:

  • Accountants
  • Attorneys
  • Investment banker
  • Qualified appraiser
  • Financial advisor
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Identifying potential buyers

Different purchasers can include family, management or outside buyers or investors.听They can take several forms, including:

  • Strategic聽鈥 see synergies with their existing businesses
  • Financial聽鈥 primarily interested in the return they may receive
  • Patient capital聽鈥 typically long-term, passive investors who buy a minority interest to provide liquidity
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Readying the business

Your team can help you take important steps such as:

  • Reducing costs
  • Diversifying the customer base
  • Incentivizing non-family managers through 鈥済olden parachutes,鈥 bonuses (including company stock), phantom stock and stock appreciation rights
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Structuring the sale

Structuring the sale in an income tax-efficient manner can have a significant impact on the after-tax proceeds available to the family. Consider different tax rates and whether they will be due at the entity level, individual level or both, depending on:

  • C corporation - an entity that is taxed separately from its owners
  • S corporation 鈥 an entity that is generally not taxed separately from its owners
  • Partnership or most limited liability companies (LLCs)

The importance of personal planning

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Planning for the sale ideally involves both your business and your personal wealth. Having a financial plan not only helps you identify your long-term goals. A plan also can help determine whether there will be enough assets after the sale to achieve those goals鈥攚hether you are looking to transfer wealth to others, start another business or pursue an entirely different path.

By estimating after-tax sales proceeds, a financial plan can also illustrate the impact of selling at different points in time versus continuing to operate the business.

1 Investor Watch report: Wind in your sales, 斗牛棋牌在线 2023.

Neither 斗牛棋牌在线 Financial Services Inc. nor its employees (including its Financial Advisors) provide tax or legal advice. You should consult with your legal counsel and/or your accountant or tax professional regarding the legal or tax implications of a particular suggestion, strategy or investment, including any estate planning strategies, before you invest or implement.

Dive deeper

For more information about planning for the sale of a closely held business, including structuring the sale for tax-efficiency and post-deal planning considerations, download Planning for the sale of a closely held business. Connect with a 斗牛棋牌在线 Financial Advisor to learn more about resources to support your business succession planning.

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