By Dave Driscoll
The value of your business is probably your single largest asset, and converting that asset to the maximum amount of investable cash to support your retirement is critical.
Your best shot at maximizing long-term value is to rely on a team of advisors to navigate the complexities of the sale of the business to a third party or the orderly transfer to insiders.
The benefits of the team approach are demonstrated by the story of Henry, the owner of a
specialty chemical distributor. Henry’s business is a very profitable “C” Corporation and he owns 100% of the stock in the company. The challenge was that the structure of Henry’s corporation required tax on the sale of the business to be paid “inside” the C Corporation, as well as again when the money was moved out of the C Corporation to Henry’s personal estate. Basically, the C Corporation status created a double taxation on the sale for Henry.
Prior to listing Henry’s business for sale, his business broker introduced him to a tax attorney, as well as a CPA specializing in taxes, for advice regarding the best allocation of the proceeds of a potential sale. The objective was to legally maximize the amount of value Henry would receive from the sale of the business. The guidance of these three advisors together provided the comfort Henry needed to move forward with marketing the business for sale.
The value of the team approach was clear for Henry. Even before the decision was made to launch the business for sale to the market, the team of advisors responded to the needs of the seller, providing the strategy and confidence to move forward with the process.
Your advisory team should include the following professionals to maximize your success
- Business advisor (business broker or M&A advisor) with the expertise, ethics and experience to prepare and market your business for sale. Note: a business broker is also needed to manage the process for transfers to family or key management. Your business broker should manage the entire process, from goal-setting, preparation and marketing through negotiations and closing. The broker must function as the quarterback, coordinating the efforts of all advisors to ensure everyone is working together efficiently and productively toward YOUR goals.
- Accountant to advise the seller on the allocation of the proceeds of the sale, while minimizing taxes associated with the sale. The accountant will also prepare the tax returns necessary to document the sale to the IRS.
- Attorney(s) to provide counsel on the legality of tax-related issues and prepare the documents necessary to properly represent the objectives of the seller in the sale. In many cases, a transaction attorney is needed to supplement the expertise of your business attorney. Additionally, your legal advisor(s) should translate your long-term wishes into an estate plan that satisfies your lifestyle.
- Financial advisor to create and implement an investment plan that reflects the long-term financial objectives and lifestyle needs of the seller, in coordination with your estate plan.
Selling your business requires in-depth guidance and savvy from each of these vocations to achieve a successful transfer and maximize your funds for your Life Beyond Business.™ Your business advisor is the key to bringing these resources together throughout the process. No seller wants to hear that “if only” an issue were addressed prior to closing, the outcome could have been better.
Remember, your team of advisors will help you keep more of your hard-earned value!
Dave Driscoll is president of Metro Business Advisors, a business brokerage, valuation and exit planning firm helping owners of companies with revenue up to $20 million sell their most valuable asset. Reach Dave at DDriscoll@MetroBusinessAdvisors.com or (314) 303-5600. www.MetroBusinessAdvisors.com