Planning for the Sale, Disposition, or Succession of a Business

For many business owners, it’s hard to imagine life without their business. While many understand that one day they will have to stop operating their business, they may find it more comforting to put those thoughts aside and deal with them later. But that’s exactly the wrong approach. When you are preparing for an Exit, what you are really doing is making your business more stable and valuable, both now and in the future. This means that even if you have no plans to exit or sell your business in the near term, you should still be preparing your business for a transfer of ownership. Remember, a business that can be sold for top dollar is also one worth keeping.

Key Features:

Further exploring this logic: What are some of the key features that make a business more valuable at exit or easier to hand down to the next generation?

  1. A business that can run without the owner
  2. Key employees who are engaged and incentivized to stay with the business even if the owner departs
  3. A business that has mitigated continuity risks
  4. Diverse vendors and customers
  5. Protected IP and trade secrets

Would you be upset if your business had these features now? Even if you planned to keep it for years to come? Of course not, and this is what Exit Planning is all about. Whether you want to sell to a third party, pass down your business someday, or hold for the foreseeable future, there is no better time than now to start thinking about how you can make your business more valuable.

Business Valuation:

Comprehensively assessing your business’s current value is a good place to start in Business planning. Engage financial professionals to conduct a thorough valuation, factoring in tangible assets, intellectual property, cash flows, and market comps. Having an accurate business valuation not only helps identify areas where you can improve value, but it also provides a reasonable valuation that you can use to build Compensation Plans or determine if you will have enough money to retire after the sale of your business. For growth-oriented owners, an Exit Planning advisor will give you options and strategies to help improve the transferable value of your business.

Risk Management and Continuity Planning:

Every established business needs to develop a continuity plan and seek to mitigate risks to key pieces of the business. Basic risk protections like buy/sell agreements, key employee policies, proper insurance coverage, and having written continuity instructions can go a long way. However, a truly valuable business will go a step further and develop succession planning for all key members of the organization. Succession planning plays a pivotal role in talent retention and development. It signals to employees that the organization values growth and career advancement, creating a motivating environment that encourages high performers to envision a future within the company. This focus on internal development helps mitigate the risks and costs associated with external recruitment, while fostering a culture of loyalty and engagement. First, identify Succession planning is critical for building transferable value and for protecting all stakeholders and your customers for businesses that rely on the founder’s vision and leadership. Identify and develop potential successors within the organization or look for external candidates capable of driving the business forward. A seamless leadership transition helps ensure continuity and preserves the company’s legacy.

Turning Key Employees into Long Term Growth Partners:

When you have thought through succession planning, you should have identified who your key employees are. A valuable business uses well designed compensation plans to retain key employees and tie their compensation directly to goals that grow the value of the business. When done correctly, this will help turn key employees into valuable long-term Growth Partners. Every business should start with the basics and provide competitive group benefits and a fiduciary advised 401k/403b plan. But you may drive much stronger growth when you consider profit sharing, cash and non-cash bonuses, phantom stock plans, Non-Qualified Deferred Comp Plans, and other more custom programs that can be targeted towards key employees only. As an end result, whether you sell, pass the business on to the next generation of family members or to the key employees themselves, you’ll have a well-qualified team that is willing and able to run the business in your absence.

Tax Implications:

Consider the tax implications when selling your business. Collaborate with an advisor to enhance tax strategies and reduce liabilities. Correctly structuring the sale can result in substantial tax savings and higher net proceeds. There are few tools available post-sale, so the best work is done well in advance. Did you know that you could potentially pay zero taxes if you use an ESOP exit? Or does your business qualify for a QSBS deduction? Have you considered using a CRT (Charitable Remainder Trust)? Will you reinvest in Opportunity Zones? Will the sale be done as an Asset Sale or a Stock Sale? Does the sale include real estate? How much cash will you get upfront? There are many things to consider here, and often some facts about the deal may be more important than the raw sale price. Remember, it is not what you make, it is how much you keep that counts when you sell your business and there may be potential for huge savings that can be made with a little bit of planning.

Post-Sale of Business:

Strategize your post-sale involvement. Determine whether you intend to stay involved in an advisory capacity, pursue new ventures, or embrace retirement. Clarifying your post-sale aspirations ensures a smooth transition and sets the stage for your next chapter.

Talk to an Asset Strategy Advisor:

Engage qualified professionals at Asset Strategy to navigate the intricacies of the selling process. From legal advisors and financial experts to business brokers and investment bankers, assembling a proficient team helps enhance the likelihood of a successful transaction.

In conclusion, selling your business is a complicated venture that involves thorough planning, strategic forethought, and emotional fortitude. By thoroughly addressing these essential concerns, you can help reduce the complexity of the sale process and potentially maximize the value of your company while seeking a bright future after its sale.

Contact Asset Strategy today if you have any questions on the sale, disposition, or succession of your business!

You can call us at 781-235-4426, or you can schedule a 15-minute Discovery Call HERE





This is for informational purposes only and does not constitute individual investment advice. Individual circumstances vary and outcomes are not guaranteed. Please consult the appropriate professional regarding your individual circumstances.

Investments in securities are not suitable for all investors. Investments in any security may involve a high degree of risk and should only be considered by investors who can withstand the loss of their investment. Prospective investors should perform their own due diligence carefully and review the “Risk Factors” section of any prospectus, private placement memorandum or offering circular before considering any investment.

Advisory services offered through Asset Strategy Advisors, LLC (ASA). Securities offered through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Insurance offered through Asset Strategy Financial Group, Inc. (ASFG). ASFG and ASA are independent of CIS. To access Concorde’s Form Customer Relationship Summary (CRS), Privacy Policy and other disclosures, please click here. Asset Strategy does not offer legal or tax advice. ia-ld-gp-a-82-4-2024


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