By: Aspen Grams, Marketing Strategist
Many Baby Boomers left the grind of the corporate world to start their own businesses and live their version of the American dream. Now that those dreams have come to fruition, trillions of dollars worth of businesses are expected to transition within the next 10 years.
However, without an accurate plan for their exit, these business owners won’t receive the nest egg they need for transition into retirement. If you are a business owner thinking about selling, read our three tips to successfully prepare for your business transition.
Assemble your team
Few business owners, no matter how confident, can do all the aspects needed to successfully plan for a profitable exit. This lack of ability isn’t a jab at you; rather, it is a testament to the strong skill set that made your company successful. Your business thrived because you focused on what you do best, whether that is baking pies, manufacturing pipes for plumbing, or repairing residential roofs.
Throughout the life of your business, you gathered a team of experts around you. They counseled you on marketing tactics, kept your finances in order, and created operational processes and procedures. In the same vein, exiting your business is best done with a team. Gathering the right advisory team helps maximize the value of the business and achieve a top-dollar sale. This team is multidisciplinary, with specialists in law, accounting, tax, mergers and acquisitions, and wealth management.
These experts guide you through the selling process, place an accurate value on your business, secure and vet qualified buyers, and tie up all loose ends prior to closing. This lets you focus on your business with confidence, knowing that your trusted partners are working to secure a sale.
Iron out the details in advance
Advance preparation has several advantages. It minimizes risk around the transaction, generates a higher sales price, and optimizes the value of the business. Furthermore, it ensures that your sales strategy is aligned with your personal financial objectives. There are three areas you can focus on to help get your details in order.
Management
Firstly, establish a strong management team that will allow for a smooth transition with the buyer. A loyal, competent group keeps operations running optimally during the transition period. In addition, they provide assurance that the business will continue to thrive without you there.
The Back End
Secondly, take time to establish processes and procedures, ensure you have up-to-date financial statements, and generate reliable reports. In short, zip up things on the back end. The benefits are two-pronged: you have a better grasp on the overall health of your business, and potential buyers have more visibility into your business structure. As a result, both sides breathe easier during the selling process.
Growth Strategy
Lastly, develop a comprehensive plan for sales growth. Take time to develop a plan that maximizes profitability while keeping costs low. This shows potential buyers a clear path to sustainable growth once they buy your business.
Create a holistic plan
When it comes to planning for the transfer of ownership, there’s a tendency for business owners to neglect their exit strategy. Exit planning professionals agree that most of their clients don’t work on developing their plans until it’s too late. When business is poor, owners focus on keeping the doors open. On the other hand, when business is good, they work to capitalize on growth opportunities. It can be compared to estate planning- it’s something you know you should do to provide for your family, but it tends to get put on the back burner.
Creating a thoughtful, pre-transaction plan around the wealth that the deal will generate gives you better long-term results. It provides financial security for both your individual bottom line and your family’s legacy. The most successful outcome includes a well thought-out tax plan, a multigenerational wealth strategy and a comprehensive investment plan. Beyond that, it includes buyout terms, owner financing options, and payment details from the sale.
Utilize your team of experts to flesh out each aspect of the plan. Their knowledge will provide the best possible terms; plus, it will remove any question about your financial future.
Conclusion
In the end, deciding to sell your business is a big decision. As a business owner, the amount of work you put in on the front end will pay out on the back end. This applies to your company’s profitability as well as the payout you receive from its sale. The common saying, “if you fail to plan, you plan to fail” rings true, as only 20% of eligible businesses actually sell each year.
Start the process of transitioning into your next life phase by meeting with a confidential business intermediary. They will walk you through the selling process, assess the current state of your business, and work on your behalf to ensure a smooth transition. Contact a confidential business intermediary at the CBI TEAM today, or call our office at (479) 770-8989.