The Team You Need When You Sell Your Business

Making a decision to sell your business is filled with a blend of pragmatism, worry, hope and indecision. Business owners who have spent decades building their companies into enduring enterprises may no longer possess the same drive they had in the beginning. They may realize that it is time for them to move on and devote their attention to new interests, passions or rest, allowing the business to grow with new leaders at the helm.

With the thought of selling a business brings a set of concerns: Is now the right time to sell? What about your business legacy? Will the new ownership be committed to the business over the long-term … or do they have plans to sell within a few short years? Many of the employees may have become regarded as family, having spent decades committed to the organization and helping it grow and succeed. What happens to them if the business is sold? How certain that you are able to get the best sale price for your business? How long will the process take? What other pitfalls exist?

Financial prudence and emotional weight can be a very heavy burden for a business owner to handle, and why a team of experts is necessary to be involved in every transaction to help carry that load. Many business owners may have  nearly 70-90% of their net worth tied up in their business. Getting the fairest value with the least negative impact takes a gathering of outside experts to make the process smooth and rewarding for the owner.

The Team You Need

There are several experts that you need to place your business up for sale:

Business Broker: The business broker provides a variety of services. In nearly all instances, the business broker is the first expert that a business owner should approach. They provide the following:

• Valuation: They help determine the value of the business and its likely sale price.

• Marketing: They help market the business across a network of potential buyers. In many instances, the marketing of the business is a confidential matter. The broker may use a “blind profile” that provides some of the highlights of the business to attract interest, but the identity of the business is not released until a potential buyer signs a confidentiality agreement.

• Buyer Screening: The broker will vet potential buyers to determine if they are financially qualified and are serious about their buying intent.

• Sale Negotiation: The broker will act as a mediator, helping structure the deal and addressing concerns about price, structure, and conditions.

• Due Diligence/Closing: The broker helps the due diligence process, allowing the buyer to review the variety of financial, legal, and operational concerns of the business. They will work in conjunction with other professionals to help ensure all necessary paperwork is in order so that the deal can close.

Accountant/CPA: This role helps determine that the financials of the business are clear and accurate. They will engage in:

• “Cleaning up the books:” This refers to organizing and auditing financial records, ensuring  financial statements are accurate, that issues of mixed personal and business expenses are rectified, and that potential tax matters are addressed.

• Tax implications: They will help analyze and illustrate the tax issues of different deal structures ( stock sale, asset sale, etc.) and provide insight in efforts to lessen the potential tax burden for the seller.

• Quality of Earnings Report: This analysis will verify the financial health and performance of the business. Its purpose to help the seller address any potential concerns that the buying party may have about the company during the due diligence phase.

Valuation Expert: This is an accredited professional who can help in determining the value of a business or asset. They provide an objective and independent opinion of value.

Although the business broker plays a role in helping determine value, the valuation expert is needed to produce a report that can be regarded as defensible, detailed, and impartial. They engage in:

• Comprehensive financial analysis: They will review all of the company’s financial records to determine financial risk, health, and profitability.

• Industry & market research: They will analyze industry trends and competitor analysis to understand the business in its market and its future profitability.

• Valuation methods: They will review a business for its assets, its income, or its market to help determine the best approach to establish its sale value.

• Formal report: They will produce a credible, comprehensive, unbiased report, that will discuss the methods used and the data analyzed that determined the business value.

Transaction Attorney: This is an attorney that specializes in the sale of a business. They handle all legal concerns for the seller, including:

• Legal documents: They will draft and review such documents as letter of intent, non-disclosure agreements, and purchase contracts.

• Legal compliance: They will identify and address potential legal risks.

• Deal structure: They will provide the seller guidance on the legal structures that best suit  their business goals and ensure that final sale contract represents those interests.

  
  

Financial Advisor/Wealth Manager: This person helps the owner with their personal finances, including such concerns as:

• Post-sale financial planning & investment strategy: They will help the business seller plan for their financial wellbeing after the sale, engaging in an investment strategy that will aid in their long-term financial goals.

• Tax & estate planning: They play an active role ( working in conjunction with other professionals) that can lessen the tax burden for the sale as well structure wealth transfer strategies to heirs and causes of interest.

Charitable Giving Strategist/Consultant: Unfortunately, this role is sometimes overlooked during the business sale process, but the impact that they can play cannot be understated or disregarded. They play an important role across a variety of dimensions:

• Clarifying goals/values: They can help a business owner determine their interest in philanthropy, providing guidance in their journey from business success to charitable significance.

• Develop a giving strategy: They can help the business owner determine  the “right” charities for the type of impact they want to make and the type of giving tools ( donor advised funds, private foundations, charitable trusts) that may make the most sense for them.

• Optimizing Tax/Financial Benefits: Working in partnership with other trusted advisors, this strategist plays an important role in determining what to give & when to give to allow the business owners the best tax advantages available.

• Family giving: The strategist can play a role in getting the next generation of a family involved and educated in the philanthropic decision-making.

• Evaluating impact: The strategist will help measure the impact of the giving on the chosen charities, allowing the donor to see if the charities are achieving their goals.

Conclusion

Selling a business is filled with a variety of rational decisions and emotional concerns. Having the right team of advisors in place is key to making the sale process a success. At Generosity Nexus, we are proud of the value that our experience and know-how can play in helping a business owner think through the philanthropic impact they want to make.

Don’t hesitate to schedule an appointment to learn more about how we can help you.