Preparing to Sell Your Business

CU we are open sign hanging on the entrance door of a small cafe. Small business concept
27 Jun 2019

What is your exit strategy?

Your company is ripe for sale. Now what? These days, your children or employees may not necessarily want to take over your business, but you still want to sell your business. So, what’s a successful entrepreneur to do?  Find a buyer, of course. Many savvy business owners know that nothing as monumental as selling a business should be done quickly. Read on to learn some helpful pointers for formulating your exit strategy.

Plan for the long term. To truly get the most out of your business and ensure you have found the best buyer, formulate a sales strategy at least 5 years in advance.1,2

Prepare yourself. Have you thought about what life will be like after selling your business? Can you arrange new income streams to replace your business income? A needs analysis may help you estimate how much money you will need to maintain your current standard of living.

Readying your business. Look at your company and its immediate rivals. How attractive is it by comparison? What do you think it is worth? Have you developed a unique selling proposition (USP)?2

Often times, the service and performance of your employees may have strengthened or weakened your USP over time. Being aware and honest about your USP may be the key to maximizing your sale. Another key strategy may revolve around your online presence. Is it current? Does it need a facelift? Make a to-do list of some potential business upgrades and schedule their implementation. Finally, don’t forget to analyze the strategic value of your business with respect to a particular buyer, not simply the standalone value.1,2

Marketing your company to potential buyers. Who are you going to market to – a strategic buyer or a financial buyer? Do you think it would be better to sell your company to a major player in your industry? An up-and-comer? Would a private equity firm be intrigued? Your marketing strategy should be strong enough to attract multiple offers whether pursuant to an asset sale or a share sale.

Dealing with taxes. What will the tax impact of the sale be? Can you manage it? Keep in mind, this information is intended for educational purposes only and is not a replacement for real-life advice. Always make sure to consult your trusted tax, legal, and accounting professionals before modifying your tax strategy.1,2

Negotiating the sale. Make sure to use a properly licensed business broker and certify that they are dedicated to you getting the most for your business as opposed to focusing on closing the deal. With all your research completed, make sure to set a sensible floor price, and be prepared to walk away if an offer comes in beneath it. Pausing after the receipt of a lowball offer may send the wrong message.

How competitive are you? If you want to sell a company and start up another in the same industry, the buyer may demand that you hammer out a noncompete agreement. This will prohibit you from starting a competing business for a given period of time. Contact your local Small Business Association for more information regarding noncompete agreements.1

Handling change. You may need to put someone else in charge of things during the ownership transition. In addition to being a good manager, you may also want to be sure they care about your clients or customers as much as you do. Making sure they uphold the values with which you started the company can help ensure its value during the transfer of ownership.1

Selling a business is a big effort, and a financial or tax professional should be consulted in order to help you outline the sale of your business as well as the transition of its ownership.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations.
1 – sba.gov/business-guide/manage-your-business/close-or-sell-your-business#section-header-2 [5/20/19]
2 – inc.com/bob-house/selling-a-business-in-2019-three-important-things-to-keep-in-mind.html [1/9/19]
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Jeffrey Johnston

Jeffrey is originally from Solon, Iowa. He currently resides in Swisher, Iowa with his wife, Prudence, and his three children, Seth, Ian, and Roman. He graduated from the University of Northern Iowa in 1989, where he majored in Finance and Investments. He has 24 years of experience in the investment and estate planning business. He is currently the President of “Premier Investments of Iowa, Inc.” Jeffrey’s main focus is Estate and Investment Planning for Senior Citizens and Pre Retirees. Jeffrey became a Chartered Financial Consultant (ChFC) in 2001. He is the author of many articles on industry related topics and he is a frequent seminar presenter. He is a Board Member TRIAD Linn County Seniors Against Crime, and he is also a past Board Member of the Heritage Area Agency on Aging Task Force. He is a member of CEO Roundtable in Cedar Rapids, a Daybreak Rotary Member, and a member of the Cedar Rapids Estate Planning Council. In March of 2009, Jeffrey became the host of the Premier Investments of Iowa Financial Hour which airs every Tuesday Evening from 6PM -7PM, on WMT 600 AM Radio. In his free time he enjoys golf, fishing, scuba diving, traveling, and coaching son’s basketball teams.