Most of the time, you only have one shot at selling your business. Financial Harvest Wealth Advisors’ research shows that the number one determinant of how satisfied business owners are with their business sale is intentionality and planning.
Intentionality not only means know what “your number is,” but also what the next chapter in your life looks like. Those that report being the happiest, most satisfied with their sale were clear what the newfound freedom enabled them to do. What are your purposes after selling?
The planning aspect involves several considerations not limited to:
- How much capital will you need from the sale to be able to support your lifestyle and family after your sale?
- What is required to meet that criteria, after taxes? How much EBITDA? What multiple is realistic?
- What can you develop and implement now that makes your business more attractive? Consistent growth? Marketing practices? Customer retention? Profitability versus competitors?
- How well does the business run without you? The buyer is buying future income that is not dependent on you.
- How long and to what degree, if any, do you want to be involved with the business after sale?
- The buyer will most likely require you to sign a non-compete. How important are future opportunities in the same industry?
- How important is maintaining culture?
- How important is it to take care of your employees with the sale?
- Do you have employment contracts and incentive compensation plans in place for your key employees?
- What terms within the sale are you looking for? More cash up front? How much of an earnout? How much upside? How much equity in the buyer? Installment sale?
- From a tax planning perspective, is there a way to structure all or part of the sale to be taxed at lower capital gains rates?
Start now with your intentions and begin sketching a plan. You can also adjust as you go.