After working hard and being committed to building your business, and getting it to the level it is currently at, the greatest gift you can give yourself, if you intend to exit, is to plan well for your transition. You stand to gain by laying out all the necessary strategies several years before you even meet potential buyers. To have all the required plans in place, you can seek the help of professionals. You may consider working with CORS, who will guide your business through a well managed transition to get to a stable state of readiness for the next ownership and management. The following are some steps you can take to have the best possible transition:
- Evaluate the marketplace
While evaluating the market, begin with your niche, sector, or industry, and then move to the broader economic environment. Consider anything that may be happening in the region, in your community, or at the national level, as well as on a global scale, that relates to customer confidence. These factors may influence the sale of your business in the future. Check if your business balance sheet is growing and if the value of your business is rising. Also, check if the industry is growing, indicating chances of growth for the business. You also need to come up with a list of possible buyers, such as competitors, family members, the business management and staff through Employment Staff Ownership Program (ESOP), and others.
- Bring together an advisory team
Have a team of professionals to guide your business through the transition. Assemble the team early to allow it ample time to acquaint itself with the history of the business, its financial position, and other things. Your team should comprise professionals like a CPA, a wealth manager, and an insurance expert. Also, a business attorney and an estate planning attorney are useful additions to the team. Picking a key advisor to oversee the business of the team and to see to it that you have the necessary team members in place is essential.
- Make your business ready
With the team being in place, you can embark on preparing your business for sale with the aim of getting the highest value from the sale. The preparations include an in-depth look at key metrics, crucial documents, a talent evaluation, and a more detailed look at the business reputation. The idea is to utilize your advisors’ know-how and experience to the maximum to tackle most of these areas. Look for any potential impediments to the sale, such as tax returns, and get a professional review them so you can take necessary actions early enough.
- Get the worth of your business
Firstly, get an informal valuation of your business by engaging a business broker to get an idea of your business worth, and to have ample time for adjustments to take care of any concerns. Once ready for a formal valuation, hire a qualified business appraiser who is experienced and who has the requisite credentials. Have your accounting and taxation advisors verify the correctness of basis calculations and work through the various adjustments. From the valuation and basis calculations, you will have a reliable range for possible offers.
- Organize your personal financial projections
As you decide on the final sale figure, consider your own financial projections, and the smallest figure you will feel is satisfactory for sale. Consider your living expenses, a reasonable allowance for eventualities, your goal for a legacy to your family, and outstanding debts and tax obligations. Engage a qualified accountant to arrive at the lowest but reasonable and acceptable sale price.
- Inform your family and prepare them for the transition
When you have family members involved in the business, inform them early enough of the transition to avoid any tension among family members for generations to come. After sharing the plan to sell the business, keep your family members up-to-date with all the developments and involve them in all critical decisions.
- Engage with prospective buyers
When you’re confident that you have appropriately handled all the necessary steps leading to the sale, you can meet potential buyers and consider bids, even on prices other than the offer price. Consider things like the jobs of your employees after the sale, the impact the deal will have on your reputation as a businessperson, any role you may want to still have in the business after the purchase, and most importantly, whoever is ready to pay the price you are quoting.
- Formulate the sale process
After settling on a buyer, you need to have the transaction structured in a way that factors in all the tax and financial implications that arise from the sale. You may weigh in on whether the business form will change, if it will be a buy-out or a reorganization, how to settle the payments, and other important things. The idea is to have your best interests well taken care of, having invested so much of your time and other resources into the business.