According to a business survey conducted, 81% of business owners wish to step down from their business within 10 years. Dreaming of the next step in your life, whether retirement or a career change is fine, but if you have set a time frame for when you want to leave, now is the time to ask yourself some challenging questions starting with, “should I sell my business?”
The good news is that Pacific Northwest Advisory (PNWA) can help you begin to find the answer and then work with you every step of the way to achieve your financial goals as you transition to this next stage of your life. If you’re wondering how to sell your business, read on.
Decide why you want to sell and determine if the timing is right as it relates to both the overall economy and your own industry’s business cycle.
Get your financial house in order before you enter the sales process. From financial plans to a business valuation, be aware of the proper sales price range.
Selling a business takes a team and there are many steps to learn along the way. Educate yourself on the sales process in advance.
Are You Really Ready To Sell Your Business?
The first questions to ask are personal and often emotional.
Why do you want to sell your business?
- Career change
- Illness or death
- Partnership disputes
- Simple boredom
The reason for your exit will dictate what you’ll look for in the terms of a sale. If it’s time to walk away from work, the payout from the sale may be of much greater importance, than if you’re just moving on to a new career.
While a speedy exit might be preferred there are instances where a buyer might want you to remain and you should ask yourself these questions:
- Are you willing to be an employee?
- Could you take on an advisory role?
- Could the business survive without you?
There are certainly instances where an owner was truly the backbone of a company and it would not stand without them. If you just aren’t sure if you can fully walk away, we can talk you through different scenarios and use our decades of experience to help you find the best answer for you.
Is This The Best Time To Sell?
Timing is everything might be a phrase that was sparked by comedians, but it is true for most of life’s activities. When to sell your business is no different. Look to the market in general and for your specific industry. An economy that’s crashing, as it was during the initial stages of the COVID-19 pandemic, does not provide the backdrop you want for selling. Similarly, if your industry has hit a rough patch, you may want to postpone selling, or if it looks in danger of disappearing, now may be the best time to get out. Ask yourself if now is the right time to sell your business.
If the timing seems off, or if other reasons leave you wary, consider alternatives to an outright sale of your business. Small Business United offers twelve alternatives to selling a business that include suggestions such as:
- Sell off equity and refinance
- Find new partners
Rarely is a complete sale the only exit strategy available. We can help you decide what solution is best for you and your company, and work with you to get the results you want.
How To Meet Your Financial Goals
The sale of a business in many ways comes down to the money. Before you take any steps towards a sale, work through your financial goals and create a comprehensive financial plan. How much money will you need to retire comfortably, what is your desired lifestyle, are you planning to make gifts or charitable donations, and are your children going to inherit from you?
Finding your goals may be the easier part of the process. The critical piece is making sure your finances are in order so potential buyers will have no problem seeing the true value of your business. Go beyond just tax returns and include documents that reflect how your business runs. Create a package that includes:
- Financial statements
- Tax Returns
- List of equipment
- Current lease agreement
- Any type of operating manual
If running your business prevents you from tackling this work yourself, or if you’d just like to bring in outside expertise, PNWA can help. We will:
- Develop a base plan of your current financial situation, then
- Model different scenarios
- Look at a range of your business valuation and the impacts from taxes
- Add estate planning techniques to possibly reduce taxation
- Create an income replacement plan
The overall goal is to find a buyer willing to pay the proper amount for the value of the business.
The Sales Process
Do you understand the sales process? There are many steps that in simple form include:
- Identify potential buyers
- Reviewing offers
- Sign letters of intent
- Due diligence
Each step has many nuances. Understanding the process and your role from the beginning will help avoid unwanted surprises.
Find the Right Team
And while knowing the process is important, selling a business is not a solo operation. Do you have a team ready to help you through the sale? Fortunately, PNWA can answer this one for you. In a recent blog we discussed how we help you build a professional team of attorneys, brokers, and CPAs to ensure the process runs smoothly and you end up meeting your goals. Of course, you can always rely on your own experts, but we stand ready to assist.
As we said at the top, deciding whether, and then when, to sell a business is daunting and requires some introspection as well as taking a hard look at every aspect of your business. If you’re ready to explore what a sale can do for you and your future, contact us. We’re ready to help you reach your goals.