How Can I Prepare to Sell My Business

March 18, 2020
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So, you are ready to retire or move onto a new business opportunity? You’ve decided “it’s time to sell my business” and you plan to use those proceeds toward your retirement fund.

Our most recent articles on the Illumination Wealth Blog have talked a lot about ways to maximize the resale value of your business. Now, we want to focus on tangible steps you can take to prepare the business for sale as you prepare for your next chapter in life.

The more complex your business is, the more complicated a sale will be. You have employees, tax liabilities, real estate assets, legal obligations and equipment that all need to be evaluated and transferred over to the new owner. Unfortunately, many business owners have little-to-no exit plan worked out when it comes time to sell. This often leads to bad decisions, weak evaluations and lowball offers.

The first step is to figure out what your business is actually worth in today’s open market. Remember, it’s not what it’s worth to you, but what a legitimate buyer is actually willing to pay when it’s time to sign on the dotted line. Get started on business valuation long before you are actually ready to sell. This will allow you to set realistic expectations while also giving you a starting point to start working toward increasing its value before it is eventually sold.

How to Increase Value

As you work toward the ultimate goal of selling the business, you will want to do everything you can to increase its overall value. We encourage you to read our recent articles, including How to Increase the Value of Your Business and Building Business Value by Becoming Replaceable [Part 1 | Part 2]. These share some helpful methods for increasing business value.

Infuse Capital

You may want to reach out to outside investors and lenders for an infusion of capital that can help your business growth initiatives. It’s a way to reinvest in your business and get it where it needs to be before it is ready to sell.

Tax Planning

Tax planning is especially crucial for a smooth business sale. Keep your books accurate and up-to-date, and understand all the tax issues that will potentially complicate any transfer of ownership. This includes calculating capital gain tax liabilities, estate tax settlements and any income/property tax disputes. Your valuation process may even uncover some tax benefits that you previously overlooked.

Proper Insurance Coverage

Too many small businesses have inadequate insurance coverage. You have to be able to protect your business from the unexpected. Again, a proper valuation will help you to make sure your insurance plan covers you fully in case something happens before or during a sale.

Succession Planning

Your succession plan should be a central part of your overall exit plan as a business owner. Who is going to take over your role and how smoothly will the transition go when the time comes to move on? Any potential buyer will want to know that there isn’t going to be a huge void to fill when you leave. Your succession plan should be clear and all the necessary pieces should be in place before you are ready to sell.

Unless something happens that forces you to sell your business quickly, you should use the time you have to prepare for a smooth and successful sale. Figure out when you plan to retire and what value you want to get out of your business, then take the steps necessary to build value and get your company ready for the transition.

Illumination Wealth works with business owners throughout North America. We can help with your financial planning, tax planning, business valuation and other needs, so you can make the right decisions and get the most out of your business sale. Contact us today to arrange an introductory consultation with one of our experienced advisors.