One of the biggest decisions any business owner needs to make is whether or not they plan to keep or sell their business. In our last post about succession planning, we discussed how to prepare for your successor to take over the business. The other choice in the “keep versus sell” debate is naturally, the sale. Our advisors at Apex Financial are experts in both options, and are fully prepared to help you plan to sell your business. Here are five tips to make the process a lucrative and successful transaction.
Selling your business involves more than a dangling “for sale” sign. You need to find the right type of person to buy the business, have a proper value estimate for the operations, and seriously consider the emotional impact. The first step is to value your business from the beginning. Most business owners wait until they decide to sell before they put a value on their company. However, researching your potential sale price and updating it regularly allows you to have a record of what the business is worth throughout its history. In the long-term, regular value updates help you plan your business’s trajectory much more effectively. Our Apex advisors can make the valuation process seamless and smooth.
The next important decision, and likely the one you’re most familiar with, is thinking about retirement when setting a price. How much do you need in retirement? This number will impact the sale price. You want to maintain your lifestyle, and knowing that cost will give you an idea of what a good sale price looks like.
The third thing you need to know is what types of buyers you’ll face. Every buyer has different priorities. Some buyers are looking to add a strategic component to their already-existing company. Other buyers are “private equity…these firms often pay with cash, and they tend to pay well in today’s markets. But most PE buyers want to see a business with a strong future.” Additionally, some buyers are high net worth families who want a business to add to their investment portfolio or to give to their children. As you begin to sell your business, you need to consider what a buyer’s priority might be, and be prepared to explain how your business fits in with their plan.
If you plan on selling your business to someone within your family, tread carefully. There are different ways to transfer ownership of a business—from trusts to dividing it among children. An advisor at Apex can discuss different transfer strategies with you to find a solution that works best.
Lastly and most importantly, keep your emotions out of the sale. Your business is personal—you’ve probably spent a lifetime pouring hard work into building your company, so letting go can be difficult. A financial advisor from Apex can help you do what’s best for the business and check your emotions to avoid irrational decisions.