First Steps To Take When You Decide To Sell Your Business
Selling your business is a major milestone that requires careful planning and execution. Whether you're aiming to maximize your financial return, ensure a smooth transition, or protect your legacy, preparation is key. Below is a roadmap to help you start preparing for a sale.
Step 1: Define Your 'Why' and Talk to Your Family
Before you take any concrete steps, it’s important to clarify why you’re selling. Buyers will ask, and having a strong, well-thought-out answer will not only instill confidence but also help you remain committed to the process. Some common reasons for selling include retirement, pursuing new ventures, or simply wanting to cash out after years of hard work.
Additionally, selling your business affects more than just you—it impacts your family, employees, and sometimes even your customers. Open conversations with your family early in the process can help prevent conflicts and ensure that your support system is aligned with your decision.
Step 2: Contact Your Trusted Advisors First and Assemble a Deal Team
Before reaching out to potential buyers, start with professionals you already work with. Your financial planner, accountant, or attorney likely has experience with business transitions and can connect you with the right specialists. These professionals can help you:
Evaluate your business’s financial health
Identify ways to increase value before selling
Navigate potential tax consequences
Recommend M&A advisors or other transaction experts
Beyond your existing network, it’s crucial to assemble a deal team to guide you through the sale process. Your team should include:
Business Transaction Attorney – Ensures contracts, legal documents, and negotiations protect your interests.
Certified Public Accountant (CPA) – Helps optimize tax strategies and ensures your financials are in order.
Business Valuation Expert – Provides an accurate valuation of your business to set realistic expectations.
Business Broker or M&A Advisor (If Applicable) – Helps market your business and connect you with potential buyers.
Wealth Advisor – Assists with post-sale financial planning to secure your long-term financial future.
By leveraging your existing network and assembling a strong deal team, you can streamline the process and work with trusted individuals who understand your unique situation.
Step 3: Organize Your Financials and Key Documents
A clean and transparent financial record is crucial to getting the best valuation for your business. Start gathering the following documents to ensure a smooth valuation process:
Financial Statements (Last 3 Years) – Profit & loss statements, balance sheets, and tax returns.
Contracts – Key agreements with customers, suppliers, and employees.
Licenses & Permits – Ensure all legal documentation is up to date.
Seller’s Disclosure Statement – Outline any risks or liabilities.
Additional Documents – Depending on your industry and potential buyers, other reports may be needed, such as inventory lists, intellectual property documentation, and operational procedures.
Step 4: Increase the Value of Your Business
Over the next few years, focus on making your business more attractive to buyers:
Reduce Owner Dependence – Train key employees and document business operations so the company can run smoothly without you.
Diversify Revenue Streams – Avoid over-reliance on a few clients or products.
Optimize Profitability – Trim unnecessary expenses and improve cash flow.
Enhance Customer & Supplier Relationships – A stable, loyal client base and reliable suppliers increase buyer confidence.
Step 5: Get a Business Valuation
A professional business valuation will help you set realistic expectations for your sale price. Work with your financial planner, accountant, or an independent valuation expert to determine your company’s worth based on earnings, industry trends, and market conditions.
Step 6: Develop an Exit Strategy
Your exit plan should include:
Your Ideal Buyer – Will you sell to a competitor, an individual, or a private equity group?
Your Timeline – Will you transition immediately or stay on in a consulting role?
Post-Sale Plans – How will you invest or use the proceeds from the sale?
Having a well-thought-out exit strategy will guide negotiations and ensure you get the best deal possible. Your experienced deal team can help you find the ideal strategy for your needs.
Step 7: Understand the Risks of Selling
Selling a business comes with potential risks, including:
Underpricing or Overpricing – A poor valuation could leave money on the table or scare away buyers.
Tax Liabilities – Without proper planning, you could face hefty tax burdens.
Employee & Customer Uncertainty – Employees may leave, and customers may be concerned about the transition.
Deals Falling Through – Due diligence can reveal issues that cause buyers to back out.
Non-Compete Agreements – Be mindful of restrictions that may limit your future opportunities.
Step 8: Prepare for the Emotional and Psychological Impact
Many business owners struggle with the emotional aspects of selling their company. Common challenges include:
Loss of Identity – If your business has been a big part of your life, selling it can feel like losing a part of yourself.
Solution: Plan your next steps, whether it’s retirement, a new venture, or advisory work.
Fear of Losing Control – Handing over your business to someone else can be difficult.
Solution: Choose a buyer who aligns with your values and transition them gradually.
Uncertainty About Finances – Even with a big payout, losing a steady income stream can be stressful.
Solution: Work with a financial planner to create a post-sale wealth strategy.
Decision Fatigue & Stress – The selling process can be exhausting and drawn out.
Solution: Assemble a strong advisory team to handle the workload and guide you through negotiations. Delegation is probably a big reason your business is successful.
You've invested years of hard work into building your business, whether from the ground up or by taking over from a previous owner. Over time, it becomes more than just a company—it feels like a part of your family. Passing it on to someone else can be an emotional journey, so acknowledge and honor those feelings. While it's a business transaction, it’s also a significant life transition.
Final Thoughts
Selling your business is a complex but rewarding journey when done correctly. By starting early, organizing your financials, optimizing your operations, and assembling the right team, you can ensure a smooth transition and a successful outcome.
If you’re considering selling your business in the next few years, now is the time to start preparing. Contact your financial planner, accountant, or attorney today to begin discussing your options and laying the groundwork for a profitable exit.
The information contained herein is intended to be used for educational purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return. If applicable, historical discussions and/or opinions are not predictive of future events. The content is presented in good faith and has been drawn from sources believed to be reliable. The content is not intended to be legal, tax or financial advice. Please consult a legal, tax or financial professional for information specific to your individual situation.
This content not reviewed by FINRA
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