Even if you have your successor picked out for after you retire and have no plans to sell your business, it’s a good idea to know what to expect anyway. Plans change all the time, from a successor leaving the company unexpectedly or becoming too ill to continue working. Taking the time to research selling now will help you feel more prepared if or when the time comes to put your business up for sale.
Questions to Consider
The first thing to ask yourself is whether you plan to sell the business as is, including all its assets, or to sell the assets separately. You also want to locate the title for major assets such as company vehicles and large pieces of business equipment. Some other questions we recommend asking yourself before selling your business include:
- What information do you intend to provide to the buyer in terms of accounting records?
- What are the tax implications of selling your business now or several years in the future? For example, will you need to pay a capital gains tax or revalue your company stock?
- Do you intend to stay on for a transition period to train the buyer on best business practices?
- If you lease the property where your business currently resides, will the leaseholder agree to transfer rights and responsibilities to the new owner?
- How will you advertise your business for sale if you decide to go that route?
It’s important not to overlook the fact that selling a business can be expensive. In addition to advertising, you need to create a budget for pre-sale maintenance and repairs and fees to cover professional services such as accounting, business brokers, lawyers, and business valuations.
Determine How the Sale Will Affect Your Finances in Retirement
It’s a common mistake for business owners to sell their business thinking the income will fund their lifestyle in retirement. While that’s an admirable goal, it isn’t always a realistic one because business owners may overestimate profits and underestimate expenses. Because of this, you might want to consider arranging the sale to provide you with continuing income after you retire. One possibility is to continue participating in rental deals your company has established to provide you with rental income every month.
Thinking about what you want to do with the proceeds from selling your business long before you ever do is also important. If you and your partner have always talked about taking an extended vacation or purchasing a cabin, make sure you’re both still on board with these ideas. As long as you have the funds to meet your expenses in retirement, there’s nothing wrong with rewarding yourself for a long and successful career by making a major purchase after selling the business.
Work with KGBV Advisors Prior to Selling Business
Business valuation is just one of the many services we offer to business owners. We invite you to contact us to learn more about positioning yourself to earn the highest possible profit from the sale of your business regardless of how far in the future it occurs.