THE BIGGER PICTURE:
7 essential points to keep in mind when deciding to sell your business
by John Leighbody
'Baby Boomers' are retiring by the thousands every day. There is one segment of this generation, however, for which the decision to retire is especially complex: business owners. They have worked hard, taken risks and built something to which they usually have a large emotional attachment. Their retirement decision involves either selling their business or restructuring it as part of a family enterprise.
For those business owners leaning towards selling the business, the process, once initiated, can happen at an uncomfortably fast pace. Your accountant and attorney will be part of the team, and you will also interview several merger and acquisition firms to take your company to market. The focus will be on the deal and maximizing value, and it will be easy to get blinded to the bigger picture in the process of executing
Before you get too far down that road, I suggest that you take a step back and consider the following:
- "Can you truly afford to sell?" It may seem simplistic, but often the net dollars from a sale will not be enough to cover living expenses. You need to know and understand how much money you need versus how much you spend. Many
times a number of personal items such as insurance and car payments that were previously covered by the company will have to be covered by you after the sale.
- Do key management personal and active family members have employment agreements that protect them if there is a change in ownership?
- Do you want other family members (such as your children or grandchildren) to receive monies from the sale? If so, what is the best and most efficient way to accomplish this?
- If your desire is for family members to reap from the sale, should the funds go outright or into a trust?
- What will be the tax consequences after the sale?
- Do you have a financial planner you can work with to determine your income needs and where the income will come from? Obviously this is money management and often owners will interview money managers after the sale. It is much better to
do this before the sale so there is no confusion.
- Check with your attorney about your existing will. You probably will need to make some changes since you are moving from hard assets to liquid assets.
While the selling process is important it - is not the only focus. Speaking with your team prior to the selling process and maintaining your focus on the bigger picture will help you have a much easier transition.