Selling your business and watching your children fly the proverbial nest aren’t as dissimilar as one might imagine. You’ve spent years disciplining, coaching, supporting and caring for your children with the intention of preparing them for the real world—and helping them make their mark on it. In the same regard, your business has also been your ‘baby’—you’ve invested time and energy building a company that, ideally, will one day continue to prosper without you.
Despite their similarities, there is one stark difference between the two: while your children may have spent years depleting your bank account, your business has the potential to reverse the damage—and provide you with funds for the next phase of your life. Ideally, when you sell it, you’ll acquire enough money to retire in comfort, invest in another business, fund a charity or participate in virtually any activity you desire.
This retirement utopia won’t happen by accident, however. To reach your ideal end game, you have to start planning well in advance of a sale. This requires you to gather a team of trusted advisors who can help you define your financial goals so that your business and its people are left in good hands.
This team should be able to help you perform pre-sale due diligence to get the business ready for sale and structure the tax and legal aspects necessary both in advance of—and throughout—the sale. If you’re operating internationally, your advisors should have international connections in the countries in which you operate, to help you navigate the complex terrain.
All of these tasks are spokes of a wheel upon which your future will depend. They will help you preserve the integrity of your business—and support the next phase of your life—by effectively and efficiently executing your company’s sale.
While your team of advisors will undoubtedly do most of the heavy lifting throughout the sale process, it doesn’t hurt to be proactive. Below are some key questions you may want to ask yourself before launching the preliminary sales process.
1. How much money will I need to retire? Your overall wealth and estate planning strategy should define the after-tax proceeds you will need to fund your retirement—which, in turn, helps you determine how much money you hope to earn on the sale of your business, as well as how long it may take to ready the business for sale to achieve that ideal price. It should also consider the funds needed to pay taxes upon your death.
2. Can my business survive without me? If you are the business—meaning the business is dependent on you for success—then it likely can’t survive without you. To rectify this, you will need to take swift and decisive action to extract yourself from the day-to-day operations so you can ultimately obtain the highest price and eventually retire.
3. Who are my potential purchasers? Determine whether family members, key employees or an employee group would be interested in taking over your business—and then take time to reflect upon which potential parties would be most ideally suited. You may also want to consider whether a third-party buyer, or combination of various buyers, would make more sense.
4. Should I sell the whole business, part of it or retain some of the assets? This question is somewhat tied to questions one and three, as it goes along with establishing your future cash flow needs as well as those of your potential purchaser (i.e. perhaps a group of employees would like to continue on with the business but cannot afford to purchase the real estate).
5. Am I prepared for some difficult—and potentially emotional—conversations? Change is often difficult—but it can be exceptionally so when you’re dealing with a family business. For instance, it can be hurtful to learn that your children have no interest in taking over your business—or, if they are interested but not the right fit, it can hurt their feelings to find out they’re not part of your future ownership plans. Similarly, your employees may experience some anxiety about their future if you’re no longer at the helm. The earlier you anticipate these potential roadblocks, the easier it will be to find solutions that will help minimize any emotional discomfort.
6. What do I want my legacy to be? Do you want to sell the business at all costs, take your money and walk away? Or do you want the business to continue, retain its current employees and carry on with your dream?
Like getting your house ready for sale, pre-sale hygiene will ready the business for ‘viewing’ by potential buyers—or help familiar buyers, like employees or family members, start off on the right foot. Starting the process early, with the right team in place, will give you time to determine your goals, develop a plan and execute it in an orderly fashion to achieve a successful outcome.