When you run a business, it can be hard to know when the time is right to retire and sell your company. If you're not sure what steps to take or where to start, then we've got you covered. In this blog post, we will cover 7 tips for selling a business so that you can get started with advanced tax preparation!

1. Prepare Sooner Rather Than Later!

Making a major life transition can take some time. Selling a business is not a simple process that happens overnight in most industries. The actual exit for a business owner may in fact be the most stressful activity they've faced since the hiring/start-up phase. There are tons of moving parts that all need to manifest into one deal between multiple parties in order for ownership to change hands.

As a general rule-of-thumb, it can take anywhere from 3 to 5 years to identify a potential buyer for your business depending on a variety of factors. We live in a world where we are unsure if the price of toilet-paper or hand sanitizer will skyrocket overnight, so justifying the valuation of your company may prove to be a daunting task. Especially if you only start thinking about these concepts toward the end of your working life.

Keeping a close eye on benchmarks related to your companies profitability will assist you in knowing your companies worth, as well as projecting future revenue. This will be one of your primary weapons while convincing potential suitors to take the reins over the organization you've been responsible for. Its also beneficial to be prepared for un-solicited offers! If your business is successful and shows promise within a growing market sector- then you'll have to get used to turning down M+A jockeys left and right.

Remember, time is money! In any negotiation, its incredibly powerful to exude patience while considering the sale of your business. There's nothing worse than feeling like you're leaving money on the table due to poor planning after spending years, if not decades building the foundation of your organization. Believe me, the sound of waves crashing onto Florida's costal regions may start to hypnotize you earlier than expected!

2. Value Your Business !

The first area that potential buyers will investigate is the financial standing of your business. Was your last quarter profitable? Did you meet or exceed growth expectations? Do you have any outstanding debts? Are the assets that your business owns depreciating or appreciating in value? Trimming the fat from your organization should always be a priority, but it becomes exponentially relevant as you approach the exit stage.

It may become difficult to pass the baton off to another party if your organization is riddled with wasteful spending amongst other bad financial habits. Before publicly announcing the desire to sell your business, spend an ample amount of time considering these small areas of improvement and compiling a list of financial documents in a way that is easy to digest. This will ensure that your operations are currently being managed properly, and increases its attractiveness as an opportunity. It can pay dividends to take care of this legwork for a potential buyer!

Another great way to measure the health of your organization is to ask yourself this question, "Will the day-to-day operations of the organization halt in the event that aliens choose to abduct you out of the sky tomorrow night?" If the answer is yes, then its clear that the organization is heavily dependent on your presence. Not a great look for someone who is planning on escaping to Florida! Consider promoting from within and empower your most senior and trusted employees in order to slowly transition away from the day-to-day activities of the business.

3. Hire The Right Help!

Like I mentioned earlier, the transaction of a business has a lot of moving parts manifesting themselves into one deal between multiple parties. It can become extremely complicated to navigate the decision making process of an exit, so it is imperative to have a team of professionals backing you up to provide a sufficient level of support. From investment bankers to financial planners and CPAs, its important to all be aligned with shared interests and goals.

Don't be afraid to be picky when considering the best candidates to fill these roles! It can be tedious, but remember, we have plenty of time to construct this team given that we are preparing for it 3 to 5 years in advance! Its incredibly easy to find "yes men" during the exit process, but rare to find individuals who share consistent values and goals. If a candidate displays urgency surrounding the exit transaction, then he is certainly not aligned with your best interests.

There should be one advisor out of the bunch that stands out as "the most aligned" with your interests. Empower this individual with the creative freedom necessary to ensure that the rest of the team is on the same page. The process will play much smoother with one chef in the kitchen as opposed to having 3 or 4.

4. Construct a Financial + Non-Financial Plan

Prior to announcing your desire to exit, consider both your non-financial and financial goals for the foreseeable future. Discussing these goals with your family and senior level employees will ease the stress on everyone by clarifying your expectations. It also ensures that the most desirable outcome for everybody involved during these next steps in your life.

The earlier that these preparations are made, the more options available to your exit-strategy team. The old saying "you can't rush perfection" holds true yet again! There are many decisions to be made before the liquidity phase such as taxes, investments and estate planning. This will improve the quality of decisions laid before you instead of being forced into the situation of making a bad decision while under pressure.

Always be open and honest with all parties involved from top to bottom. Planning your next steps with those closest to you will give you a better idea of which, and how many resources you'll need to remain comfortable. This will naturally assist you in forming the minimum price that you willing to accept to hand of the reins of the business and make your exit. Adjustments can be made accordingly, but ultimately its up to you as the business owner to set the standards for the exit-strategy team to follow.

5. Listing Potential Suitors

Once the floor price of your organization has been established, spend some time brainstorming who would want to purchase your business and their intentions. By compiling a list of potential buyers, the most ideal parties to negotiate with will reveal themselves. To some business owners, the intention of the buying party is extremely important but to others, it might rank as a lower priority.

I am of the mind that understanding the buyers intentions is essential to a seamless transition of ownership. If the current employees feel as if their concerns are being consider, they are much more likely to be receptive to the new owners. The least amount of friction between front-line workers and management is always important to strive for.

This list should include both insiders consisting of friends, relatives and senior level employees as well as outsiders such as your competition or complimentary businesses in an adjacent market. Finding the perfect match is difficult but well worth it in the long run to keep operations flowing smoothly.

6. Weighing Offers

The offers received for your business will most likely range from offensively low to outrageously high. Be wary of outsiders while considering the competency of insiders. The last thing most owners want is to sell-out to a party without a shared interest in the sustainability of the business. After building something from the ground up, there is an increased level of satisfaction for owners who decide to sell to a party interested in continuing to push the mission of your organization.

Selling to an insider may prove to be the most attractive option as there are many ways to remain influential to the organization if they wish. Plus there are endlessly creative ways that exist to extract liquidity out of the business during retirement. This can also benefit you during tax time depending on your goals.

Selling to an outsider with intentions of stripping the aspects that they deem as valuable usually leaves a bad taste in the mouths of those who decided to stick around post-sale. Those who decide to stick around should always be considered due to the fact that a lot of them have stuck with you through the ups and down since day one.

7. Envision Your Post-Sale Life

The emotional aspect of cutting ties with an organization may be a larger hurdle than anticipated. Many successful founders decide to remain close by slowly delegating tasks to reduce their workload, while others never think twice about the organization post-sale. It is completely normal to belong to one camp or the other but theirs rarely any overlap. Either you've still got one foot in the business, or you're completely out once ink hits the paper.

The best way to prepare for this tug on the heart strings is by spending a month or two away from the business to gauge your feelings. Sometimes "you don't know what you got until it's gone" and this is especially true to selling a business. This is a personal decision that takes time to sink in.

With proper planning and guidance, you can be certain that you're positioning yourself as well as your business for success!

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