Selling your business is the culmination of years, possibly decades, of hard work. It most likely plays a key role in your retirement plans. The two most important determinants of a successful business transaction are sufficient time to plan and an adequate plan. This might seem obvious, but most family business owners lack a formal succession plan. Ideally, you should begin planning well ahead of a transaction.
No matter what your transition plan is and if it either is to an internal/external party, the following guidelines can help the process move along more smoothly.
Your specific transition may depend on your financial situation and your commitment to your business. Consider how much involvement you hope to have in the coming years. It’s also important to think about who a transition may affect: customers, suppliers, and staff. If you are a key component of the business, you must be prepared to hand the reins over to someone else while preparing stakeholders for this cultural change.
No matter how large your transaction is, you should partner with legal counsel, an experienced M&A advisory team, an accountant, and a financial advisor. If you hope to transfer ownership to your family, you might not need a broker, but you should still engage an outside appraiser.
You must hire an attorney who understands wealth transfer and M&A. This is unlikely to be your in-house counsel. Similarly, you need to work with an accountant who brings significant experience managing the tax impacts of ownership transfers, not just the person who does your taxes. An experienced M&A advisor or third-party appraiser can also help you analyze your company to arrive at a reasonable valuation. And finally, work with your financial advisor on big picture issues. They should help you develop your succession plan, manage retirement-related wealth issues, and partner with your other advisors to help make your plans a reality.
For many owners, valuation is the most difficult aspect of selling a company. After all, you’ve devoted significant time and work to your company, and it’s hard to assign a price tag to that. Your appraiser can help you be realistic, and may offer strategies for increasing value, especially if you have sufficient time to do so.
Your M&A advisor should analyze the overall market, then identify a pool of potential buyers who might be interested in your company. Understanding what these buyers seek can help raise value and shorten the timeline to closing. A good M&A advisor should also explore alternative options for selling, such as an ESOP. This can grow your pool of investors or buyers, and may even help you realize more value from the transaction.
You must also update your estate and financial plans. Consult with a financial advisor and CPA to assess how much you need to make your retirement dreams a reality. You might need to adjust your sale timeline based on this information. Now is also a good time to reveal your will and other estate planning documents.
Finally, don’t neglect the company you’re expending so much effort to sell. Now is the time to increase value and cash flow, so that buyers know they’re getting a sound investment. Push forward with an aggressive growth plan. Build something that buyers will be willing to compete over. Keep your eye on the prize, and let your advisory team handle the ins and outs of the sale.
About Vision Point Capital
For over 20 years, our team has supported our clients with comprehensive advisory services to help them with their complex business valuation and transition needs. Few other firms offer such a complete suite of business transition services as it relates to M&A, Valuation, and ESOPs.
Our client’s personal goals are at the heart of everything we do. We are well versed in advising clients across a broad range of industries and help them manage and navigate valuation and all the business transition alternatives available to them. In fact, when you work with Vision Point Capital, you leverage our resources, experience, and expertise to help you grow faster and optimize value for reaching a successful business transition.