Key Highlights
- Selling your business is a complex endeavor that demands expert guidance to realize the highest value.
- Assembling a “deal team” of advisors, for example a business broker, attorney, CPA, and financial advisor, can streamline the sale and protect your interests.
- A strong team helps determine go-to-market strategy, understand key risks, potential tax pitfalls, navigate negotiations, manage due diligence, and ensure a smooth transaction.
- Each advisor brings unique skills to the table, from marketing and valuation to legal expertise and financial planning.
- Proactive planning with your team is essential to minimize tax liabilities, maximize your take home proceeds, obtain great deal terms, and secure your financial future.
For owners, selling their pride and joy is not just a huge financial decision, but can be an emotional decision as well. However, the process of selling your business can be complex or time and energy consuming. Building your “superhero advisor team” is essential for you to hit your business, financial, and personal goals. Each expert on your team will guide you through a unique aspect of the transaction. They will help you cross the finish line happily and get the best possible price/ deal terms for your decades of hard work.
Identify Your Business Sale Advisory Partners
A crucial step in preparing for the sale of your business is identifying the core members of your advisory team. This team typically consists of key professionals such as a business broker, financial advisor, tax planner, and legal counsel. Each member plays a unique role in guiding you through the complex process of the sale of a business. With their expertise as advisors in areas like business valuation, financial planning, tax considerations, and legal intricacies, these advisors are essential in maximizing your sale price and ensuring a smooth transaction.
The Role of a Business Broker in Navigating Valuation, Marketing, and Sales
A business broker, or M&A Advisor, is your quarterback on the sale of your business. This person helps you weigh all pros and cons of each decision, weighing risks, benefits, and outcomes of what can be a complicated process. These professionals excel at business valuation, connecting you with potential buyers, and ensuring you secure the right buyer for your enterprise. Their guidance on the fair market price, negotiations, and confidentiality agreements is invaluable. Their support is crucial for a successful sale, and more also just importantly helps you keep focused on running the company while the transaction is in process.
Legal Counsel – Transaction Experience And Risk Management
Navigating legal intricacies in M&A transactions requires a seasoned legal counsel with specific transaction experience in your industry. Your chosen advisor should possess a deep understanding of the unique challenges and regulations that govern your type of business. Their expertise will ensure a smooth transaction process, from due diligence, negotiating a purchase and sale agreement, earn out, equity roll over, or lease agreement if commercial real estate is involved. By having legal guidance tailored to your industry, business, and personal wealth situation, you can confidently navigate the complexities of the sale with precision.
Tax Planning – Accountants with Mergers Experience
When preparing for a company sale, tax planning plays a critical role. A Certified Public Accountant (CPA) with experience in Mergers and Acquisitions (M&A) can provide valuable insights. By analyzing your tax returns and financial statements, they ensure that tax implications are minimized, optimizing the value of your company. Their expertise in structuring the deal can result in substantial savings and a smooth transition. Collaborating with a CPA and bookkeeper specializing in M&A brings a strategic advantage, safeguarding your financial interests throughout the selling process. The most common challenges typically include: depreciation recapture tax exposure, capital gains, purchase price allocation, and working capital negotiation.
Financial Advisors – Wealth Management Post-Sale
After finalizing the transaction, the expertise of a financial advisor becomes invaluable for effective wealth management post-sale. A seasoned financial advisor can assist in optimizing the proceeds from the sale, providing strategic advice on investment opportunities, tax implications, and overall financial planning tailored to your personal and estate wealth planning. Their guidance ensures a smooth transition into the next phase of your financial journey, safeguarding and growing your wealth for the long term. Partnering with a financial advisor post-sale is a prudent decision for securing your financial future. Even better, working with a wealth management professional well ahead of the sale can help you build retirement wealth, estate plan, and optimize the minimum amount of working capital required so that you are paying your future self and not just your vendors and employees.
Family – The Most Important Shareholder and Advisor
As a business owner, your family has been with you through thick and thin, both in life and in professional adventures! Identifying and finding the right buyer is difficult, making key decisions on the future operations of your business and your employees is incredibly difficult, and often times business owners need the expert advice of a best friend, a spouse, a brother/sister, or parent to be a sounding board to help make sure the right decision is truly being made.
Business Sale Advisors
Putting together a strong team of advisors is important for a successful company sale. Each person has an important role in dealing with each complicated part of the sale process. They help keep your finances safe pre-sale, during, and post-sale. This team may include business brokers, legal experts, financial advisors, and tax strategists. The bottom line is that all their knowledge comes together to create a smooth transition and protects your interests. By spending the time and energy to prepare, you can help ensure a successful transaction, business transition, and effective management of the business sales proceeds.
If you want to put together your A-team, contact us to start the process.
Frequently Asked Questions
What is the best way to find a top tier business broker?
The best way to find a great broker is to ask other small business owners and people in your network for recommendations. Look into their background, check their references, and make sure they have the right skills for your industry and size of business. The M&A industry is forever changing, and working with a motivated, and modern firm is key to attracting the best buyers and most attractive offers.
How do I determine the value for my company and sales price?
Owners should understand their fair market value for their company, but depending on the size and complexity of the business, you may set a sales price or you may decide to go to market without a price in a blind competitive bid. Talking to a business valuation expert can give you helpful insights on which methodology is the best fit. They will look at your financials, compare your industry, and assess the value of your company’s assets, sales pipeline, and operational efficiency, which can alter the buyer’s pricing expectations or deal terms. Interest rates on loans change often, so working with an advisor with close contacts in banking is key.
Should I sell my company myself?
Selling your company on your own is doable, but it’s best to hire an advisor, such as a business brokerage firm. They can perform a valuation, create a marketing plan, know how to reach buyers at a large scale, and negotiate great deal terms. They can also help with due diligence and provide professional help in navigating the complexities of the sale. This support can help you get the best possible price and manage any complicated issues that may come up. Running your business is hard enough, running the sale can distract you from making a profit, which is the most important thing for buyers.
What are the legal considerations in a company sale?
Key legal points to consider depend on your business and industry. In no particular order you should consider:
- Keeping the sale confidential from employees, customers, and vendors
- Impact of past lawsuit and claims on a business sale
- How to consider intellectual property in the sale
- Sale of real estate or a lease of real estate
- Key deal terms like: owner non-compete, purchase price hold backs, equity roll over, determining working capital requirement and working capital true up, seller’s note (if needed), financing contingencies, exclusivity time period, transition timeline and responsibilities, and countless others!.
How can I minimize tax when selling my company?
Minimizing tax liabilities takes smart and savvy planning with a business sale transaction tax expert. They can guide you on how to sell your business in a way that saves you money on taxes. This includes looking at options like installment sales, using tax credits and deductions, purchase price allocation to reduce the taxes you pay when selling. Capital gains tax is the key consideration, but many states have other tax codes that could apply to your business sale, ultimately reducing your take home amount.
How is a business broker paid?
Business brokers are typically compensated through a commission-based model, earning a percentage of the final sale price of the company. This incentivizes them to secure the best deal for you. Understanding their payment structure, up front and/or retainer fee is crucial when engaging their services. The fee paid to a broker can typically be applied as a transaction expense and lower your capital gains tax exposure.
How is an attorney paid in an M&A transaction?
In a company sale, attorneys are typically paid based on an hourly rate, a flat fee, or a percentage of the transaction value. It’s crucial to discuss payment terms upfront to avoid any misunderstandings during the sale process. The fee paid to an attorney can typically be applied as a transaction expense and lower your capital gains tax exposure.
How is a CPA paid in the ale?
In a company sale, CPAs can be paid based on a flat fee, hourly rate, or a percentage of the sale price. The payment structure varies depending on the agreement with the CPA and can include upfront fees or a combination of methods.
How should I involve a financial advisor / wealth manager in my company sale?
Engage a wealth advisor for guidance in optimizing financial gains BEFORE and after the sale. They can help you keep less cash in the business in the run up to the company sale, put more into your retirement, and then maximize post-sale earnings with strategies that align with your lifestyle, estate, and retirement planning needs. In our experience, 80% of business owners do not have a financial planner that is equipped to handle a major wealth event like a company sale. We are happy to connect clients with a qualified wealth management firm well versed in business sales
