We work with small and mid-size business owners who are planning to sell their business. The value of the business is often the key driver to the success of their financial plan. We work with them to create a comprehensive holistic financial plan that outlines how they will achieve key financial goals like retirement and leaving a legacy for their loved ones. This type of plan addresses tax planning, investment planning and estate planning.
Selling a business is a significant decision, often marking the culmination of years, if not decades, of hard work, perseverance, and dedication. The process can be complex and emotionally charged, and being well-prepared is key to ensuring a smooth transition and achieving the best possible outcome. This article provides a checklist to help guide small and medium-sized business owners through the necessary steps in preparing for the sale of their business.
1. Begin Planning Early
Planning for a business sale should ideally begin years before the actual sale. This involves understanding the market, grooming potential successors, and positioning your business to be attractive to potential buyers. This also includes getting your financials in order, improving business operations, and resolving any potential legal issues.
2. Understand Your Business’s Value
It is critical to have an accurate understanding of your business’s value. You may wish to employ a professional business valuator or use industry multiples as a starting point. Be prepared to justify your valuation to potential buyers.
3. Get Financials In Order
Buyers will want to see well-organized, clear financial statements going back several years. Ensure your profit and loss statements, balance sheets, and cash flow statements are up to date and accurate.
4. Legal Housekeeping
Address any outstanding legal issues that could become obstacles in a sale. This could include patent disputes, employment contracts, or outstanding litigation.
5. Organize Key Business Documents
Prepare a comprehensive portfolio that includes key business documents such as contracts with suppliers, customers, and employees; lease agreements; and a list of assets included in the sale.
6. Identify Potential Buyers
These could include competitors, customers, suppliers, employees or financial buyers like private equity firms. You may also consider using a business broker to help you identify potential buyers.
7. Develop A Sales Pitch
Your sales pitch should highlight your business’s strengths, growth potential, and market opportunities. Be prepared to discuss your customer base, the uniqueness of your products or services, and your business’s strategic advantages.
8. Plan For Due Diligence
Buyers will want to scrutinize your business’s financials, legal issues, customer base, and more. Prepare for this process by having all relevant information ready and accessible.
9. Prepare For Negotiations
Have a clear understanding of your bottom line and be prepared to negotiate price, terms, and conditions. Also, consider involving a lawyer or business advisor in this process.
10. Plan For The Transition
Post-sale transition can be a delicate process. Have a clear plan for how you will transition the business to the new owner to ensure a smooth handover and minimal disruption to the business.
For small businesses a business valuation from a Chartered Business Valuator may be helpful and you can discuss this with your accountants. We often coordinate our efforts with our clients’ accountants when developing the financial plan. For mid-size businesses, as part of IG Private Wealth Management, we work with our IG Private Company Advisory (PCA) group which provides strategic and transaction advisory services for businesses with annual sales between $20 million and $500 million. That service includes:
Selling Or Acquiring a Business: Sourcing potential buyers or acquisition targets for your business can be complicated. Our PCA advisors provide expertise in deal sourcing, due diligence, company valuation and negotiation to help you take advantage of growth opportunities and realize maximum value.
Strategic Advisory: Benefit from deep industry knowledge and strategic insights and make informed decisions on crucial matters such as market entry, expansion strategies, restructuring, and succession planning.
Raising Capital: PCA advisors will guide you through the process of obtaining capital to grow your business. They specialize in helping you secure debt, equity or mezzanine financing, or alternative funding sources on terms that suit your specific situation.
Selling your business can be a complex process, but with careful planning and preparation, you can position yourself for a successful transition. Remember, it’s okay to seek professional help in areas where you’re unsure. Accountants, business brokers, and legal advisors can all provide valuable assistance during this significant moment in your business’s lifecycle.
We can help you plan for what happens next. A successful transition of your business is a critical aspect of your financial well-being. We can help you navigate the key decisions to help you achieve your goals and help you make better financial decisions before and after the transition of your business.
Steve Gobel & Kevin Sampson are wealth advisors with over 30 years’ experience each in the financial planning advisory area.
They use their extensive knowledge in the areas of Retirement, Investment, Tax and Estate Planning to develop comprehensive financial plans for business owners and professionals that help them achieve their financial goals. Discover how we can help unlock your company’s potential.
Steve Gobel CFP RFP RRC CEA TEP, executive financial consultant
Kevin Sampson CFP RRC CEA, senior financial consultant
Investors Group Financial Services Inc.
This is a general source of information only. It is not intended to provide personalized tax, legal or investment advice, and is not intended as a solicitation to purchase securities.
Steve Gobel & Kevin Sampson are solely responsible for its content. For more information on this topic or any other financial matter, please contact an IG Wealth Management Consultant
