Nancy Graham April 6, 2017 Business Wealth Personal Wealth The Blood, Sweat and Tears of Selling Your Business You’ve shed blood, sweat and tears towards growing your business. You’ve worked excruciating hours for years through good times and bad, making all sorts of sacrifices. And the day is finally here…you are about to sell your business and ride off into the sunset with your bags of money…but wait…you obviously know what you are doing when it comes to BUILDING a business…but odds are that you’ve never been in the business of SELLING your business. If you’ve never sold a business before, how do you address important questions you may not have even thought to think about? I’ve found it helps to step through a handful of “-als.” These include: emotionals, behaviourals, practicals, logisticals and, finally, financials. Let’s start with the “emotionals.” Are you really ready to sell? If you’ve not yet done so, take some time to step back and evaluate your life as a whole. Think through your greater goals – the ones you have for you, your family, your community and your career. How does your business fit in … or does it? Is it still essential or at least integral to your big picture, or has it started detracting from instead of adding to what you really want out of life? Next, prepare for the “behaviourals.” It’s unlikely you’re selling your business on a whim, but you are probably still not fully aware of what you and your family are about to get yourself into. If you’ve already outlasted others and succeeded as a “player” in your field of expertise, it can be hard to accept how vulnerable you become when the time comes to think about cashing in your winning chips. Are you ready to step outside of your comfort zone and remain stoic in the face of unfamiliar risks? This is no “quick rip of the Band-Aid” either. Expect the discomforting transition to take at least a year or two. Once you’re mentally prepared to step away from your business, it’s time for the “practicals,” or planning for your “What’s next?” Will you fully retire? If so, what will you be doing with your new-found free time … and how much will it cost? Maybe you’d rather take on a new career or another business opportunity. Have you thought through not only what that new endeavor might be, but what it will demand from you and your family? Whatever your dreams may be, avoid the common mistake of treating them as vague, “some day” afterthoughts. Integrate them into your practical due diligence sooner than later. Next, line up your “logisticals.” Through the years, I’ve helped dozens of people transition into new careers and/or retirement. In my experience, selling even the best of businesses is rarely a cake walk. It’s more like slogging through cold molasses. Or actually, it’s usually a bit of both – heated frenzies of activity interspersed with painful pauses beyond anyone’s control. The better you’ve prepared for every possibility, the more likely your project will flow along more smoothly. Typically, that takes the advice and expertise of a team. Are you a sole proprietorship or a partnership? Is your liability structured limited or unlimited? Is your current structure appropriate for a potential sale? An experienced accountant and able lawyer can help you evaluate and optimize your business and its structure as needed. Your accountant can also help you plan for and manage the capital gains and related tax-optimization strategies before, during and after the sale. Involve your financial planner You should also seriously consider looping in your financial planner. I’m not just saying this because I am one, but I have found that the sooner I’ve been looped into a process, the better I can prepare for and assist with the transaction itself as well as manage the pile of proceeds it produces. That brings me to my final point – your financials. Once the money is in hand, you’ll want to revisit your earlier plans to ensure they remain on track … or adjust them as needed if they’re not. Are the proceeds of the sale still sufficient to support your goals or have your circumstances evolved? Where are the assets going, and how should they be managed for their intended role? If you’re starting another business or spending on other near-term needs, you may need to allocate some of the proceeds to liquid cash or cash equivalents. If you plan to use the money for long-term goals like retirement, you may want to put it to work in the stock or bond markets, balancing your personal risk tolerances with your practical wealth management goals. You’ll also want to prepare a tax-efficient draw down strategy – replacing your business income with a prudent “salary” from your investments. If you had existing investments, have you revisited them, to see if your new assets and new lifestyle may also warrant new money management plans? Whether your goals are the same or different, look for ways to minimize taxes and other expenses, while maximizing your most efficient strategy for achieving them. Of course, when you decide to sell your business, you want all of that hard work and labor of love to pay off in hard, lovely dollars – the more the merrier. That said, too often, I’ve seen proceeds from the sale of a business exceed expectations … only to evaporate through lack of planning. By first preparing for the emotionals, behaviourals, practicals and logisticals, you stand the best chance of ensuring that the financials from the sale of your business will go the distance for you and your family. Are you a business owner with other “No Dumb Questions” on your mind? Let me know about them, and we’ll keep the conversation going. From my business to yours, I wish you all the best. Share: Facebook Twitter LinkedIn Email CIRO Advisor Report
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