Looking Down the Road… with Perspective… To Sell Your Business

We’ve been talking a lot lately about the demographic forces that will soon create a situation where there will be far more businesses for sale than buyers to buy them.   The first wave of the 78 million Baby Boomers are now turning 62 and approaching retirement age, and there are only 44 million Gen-Xers coming up behind them.  Owners planning to sell their businesses need to plan ahead and prepare their enterprises for the type of buyer and sale price they are hoping for.

In this issue of the Vann Group Journal, we offer advice on how to ready yourself and your thinking to plan for an eventual sale or transfer.  Once this thinking process is complete, you’ll want to check out our latest white paper, Preparing Your Business for Sale, newly posted  at www.vann-group.com for an actual step by step process.

The best way to start is to think through the various perspectives that will give you a comprehensive view of what you need to do to achieve your goals from selling your business.   There are many pertinent and critical perspectives; starting with your own and including other parties who have an ownership interest, you financial advisor, your accountant, the future buyer of your business and his or her financiers.

Critical Perspectives…

Yours.  The first thing you need to do is ask yourself some tough questions…  When do you want to sell your business?  What will you do once it’s sold?  If it’s retirement, what does your financial picture need to look like in order to retire?  If it’s to move on to something else, what will you need to get out of your business in order to finance that next professional adventure?

Your Financial Advisor’s.  Even if you think you know the answers to the above questions about how much you’ll need, it is always wise to get the objective opinion of a skilled financial advisor.

Your Partners/Investors’.  Depending on the ownership structure of your business, there may be one or several other people who have a bona fide interest in if, when, and how you sell your business.  These situations can be tricky, and it is absolutely critical for everyone to be on the same page.

Your Accountant’s.  Of course you can’t possibly know the tax implications at this juncture of a future business sale or transfer, but the point here is to a) not forget that the IRS will want its piece of your pie, and b) to know that there are many different ways to structure a business sale, each with its own tax implications.  You’ll want to make sure you have an excellent business tax advisor at your side when the time comes.

Your Potential Buyer’s.  This may be the hardest but most important viewpoint to consider.  This is when it’s critical for you to shake off all those years of pouring your heart and soul into your business and look at your enterprise through the lens of a potential buyer.  Put yourself in a buyer’s shoes and look at your business’ real transactional value, growth potential, and what it’s going to take to be successful in the long run.  Remember, your buyer will be interested in the future; not the past.  And, for a deal to really work, it must work for all parties.

Your Potential Buyer’s Financier’s.  This is where the rubber hits the road, because in order for your buyer to actually buy your business, he or she will need financing.  That means you need to take an even bigger step back from your current vantage point and look at the value of your business through the lens of your potential buyer’s lender.  

The Time Perspective.  The last perspective that you need is that of time – you need to determine how much time you’ll realistically need to prepare your business for the type of sale you want.  To help you do so, check out our step by step white paper entitled “Preparing Your Business for Sale”, found in our online Learning Center at www.vann-group.com. 

If you have any questions about anything you’ve read here – or think you might benefit from an objective and experience transactional advisor to speak with, please contact: