Things to Consider When Selling Your Business

If you are considering the sale of your business you might want to think about a few things before getting the process started. Whether you’re thinking about selling immediately or within the next 5 years, the sale process can be complex. The good news is that you might be able to cut away some of the complexity with a honed strategic approach and effective planning. Throughout my career I’ve assisted with quite a few business transitions. To illustrate key considerations business owners should ponder, I’ll review a couple common scenarios that I’ve encountered.

Example 1:

Your decision to sell is contingent (in part or completely) on your ability to retire.

If you plan to retire shortly after the sale of your business, before you even begin thinking about selling your business you should determine if you’re able to retire without sacrificing your current quality of life after the sale is complete. Many business owners devote a great deal of time and energy safeguarding the success and longevity of their enterprise. But it’s also vital to remove your “professional hat,” once in a while and put on your “individual hat” to take the time to plan for your personal future and retirement. In most cases, your career and ability to earn determine the landscape of your retirement years. If you haven’t yet created a financial plan, at this point in time it might be helpful to take a step back from the sale of your business to take charge of your financial future.

A financial advisor can help remove some of the burden creating a financial plan by guiding you through the process of analyzing your current financial situation and financial outlook.

A good financial advisor:

  • Will take the time to get to know you and thoroughly understand all the layers of your life—not just the financial aspect.
  • Should be just as concerned as you to help you reach your financial goals.
  • Looks out for your best interests and serves in a fiduciary capacity.

Take a look at our Top 5 Questions to Ask a Financial Advisor or Importance of Partnership postings for more information on finding an advisor that is right for you.

If you already have a financial advisor, and find yourself identifying with the example above, ask your advisor if he or she can provide scenario planning to explore various factors of your financial situation, such as:

  • How the timing of the sale can affect your financial outlook. For instance, if you sell now, in 3 years, 5 years, 7 years or more for a certain sum (either cash outright or earn out), might that affect your:
    • Retirement possibilities
    • Cash flow
    • Other buying or selling decisions such as:
      • Sell primary residence
      • Buy winter property
      • Travel extensively
      • Make charitable gifts.
  • The application of  different earn-out scenarios
  • The consideration of other forms of liquidity (e.g., bank loan at current low rates).

A scenario planning session can help you garner valuable information that wouldn’t otherwise be available to you, and perhaps help you find the answers to your most pressing questions.  Once you’ve evaluated your personal financial situation and aligned it with the possible outcomes of the potential sale of your business, you may be ready to make a decision on whether to pursue this opportunity.

Example 2:

The sale of your business involves multiple owners and/or family members.

This is another common situation that I’ve encountered. If your business is a corporation with other shareholders, you may be likely dealing with different lifestyle choices, financial concerns, outlooks, levels of interest and/or opinions on the sale. It’s important to get everyone on the same page in order to reach an unanimous decision. A financial advisor can work with you to help you build an understanding of options and assist with the facilitation in this process. It might be significantly smoother if each ownership unit is able to participate in the scenario planning review and test the “what-ifs” of the sale. Ideally, each shareholder would also have a personal financial plan in place in order to make an informed decision.

Having the proper tools, information and a good plan are essential to mapping success in any form- personal or professional. Whether or not you decide to move forward with the sale of your business, you should consider outlining a business succession plan to support the well-being of your business in the event unforeseen circumstances occur. And don’t forget to invest time in yourself. Identify your financial goals, create a solid financial plan and stick with it!

Wipfli Financial Advisors, LLC (“Wipfli Financial”) is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC); however, such registration does not imply a certain level of skill or training and no inference to the contrary should be made. Wipfli Financial is a proud affiliate of Wipfli LLP, a national accounting and consulting firm. Information pertaining to Wipfli Financial’s management, operations, services, fees and conflicts of interest is set forth in Wipfli Financial’s current Form ADV Part 2A brochure and Form CRS, copies of which are available from Wipfli Financial upon request at no cost or at Wipfli Financial does not provide tax, accounting or legal services. The views expressed by the author are the author’s alone and do not necessarily represent the views of Wipfli Financial or its affiliates. The information contained in any third-party resource cited herein is not owned or controlled by Wipfli Financial, and Wipfli Financial does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Wipfli Financial of the third party or any of its content or use of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner, investment advisor, attorney or other professional.
Pat Brault

CPA, CTFA | Principal, Senior Financial Advisor

Patrick Brault, CPA, CTFA, is a Principal and Senior Financial Advisor for Wipfli Financial Advisors in Minneapolis, MN. Patrick focuses on comprehensive financial planning and investment management for business owners, retirement plans and foundations, as well as advanced planning for seniors and family caregivers.

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Things to Consider When Selling Your Business

time to read: 3 min