Sale of Business – Investment Guide & Strategy
Small businesses are the lifeblood of our economy. They make up 99.7% of all firms and provide 48% of all jobs in the United States. Nationally, Baby Boomers own almost half of all privately held businesses with employees. Six out of ten U.S. business owners plan to sell their company over the next decade.
Our local business landscape will shift dramatically as Baby Boomer business owners retire. The effect on their employees and the local economy will be massive. Over eighty-five percent of business owners do not have a succession plan in place. And too many of them can’t find a buyer when they are ready to sell according to project-equity.org
At Fujiyama Wealth Management, our investment guide and strategy will provide the guidance you need to navigate through the complex steps necessary to sell your business. Selling a business is more than just a financial decision – it’s also an emotional decision. Your business is part of your identity. You’re not just selling the company, you’re letting go of a part of yourself.
The following are some of the most common questions business owners ask:
I want to sell my business in 3-5 Years and retire. But What will I do after the sale?
Many business owners struggle with the idea of selling their company. Entrepreneurs put their hearts and souls into the business, it becomes part of their identity. You poured your life into the company, but what about life after business? The next steps are overwhelming.
As a Certified Financial Transitionist®, we start our consultation by asking business owners these questions. Why do you want to sell your business? What is your timeline to complete the sale? How do you envision your life after selling the company? What goals do you want to reach in the next phase of your life?
You planned and strategized for decades while running your company. We will help you think through life after selling your business. Do you have travel goals or philanthropic aspirations? How do you want to spend your time? We work with you to achieve a fulfilling and satisfying retirement.
Reviewing your company’s finances are very important. A successful exit strategy also includes examining your personal life goals as you transition away from the business. We can help you and your loved ones navigate this important life decision and provide a clear picture of your future.
Did you coordinate with your Trusted Advisors (Attorney, CPA, Business Broker, Valuation specialist, etc.)? Do you have an advisor(s)?
Working with specialized professionals can increase the sales price and help you structure the deal. They can reduce the taxable liability and facilitate the sales process. If you do not have an advisor, we will connect you with one.
Have you planned a Tax-Efficient Exit Strategy?
A business sale can be structured in various ways. We will work with your trusted advisor(s) (Attorney, CPA, Business Broker, Valuation specialist, etc.) to ensure it is structured in the most tax-efficient matter.
When should I start preparing the Company’s financial records?
One of the most important aspects of selling a company is the due diligence process. Experts such as business brokers, investment bankers, CPAs, and M&A lawyers recommend that business owners should start organizing their balance sheets three to five years before they are ready to sell. It’s similar to selling your house – you clean up all the mess, paint walls, renovate, and make your home attractive to potential buyers.
If it’s a manufacturing company, potential buyers want to look at the equipment and inventories. Many times, companies hold onto equipment that’s no longer used. If it’s off the balance sheet, but it shouldn’t be in the factory. Inventory lists must be current to show real value. These are some simple things that make a big difference
You also need to work with your CPA to make sure that you can produce three to five years of good P&Ls and Balance Sheets that are consistently written.
My partner and I are life-long friends who trust each other. Do we really need an official agreement?
Yes, you do. Buy-Sell agreements protect you, your partner and your business. Be prepared with periodic appraisals to set realistic values of the company. We will organize transition plans. These can be hard conversations. For example, what do we do in the event of a business partner’s death? Successful businesses forecast for eventualities to safeguard the company and the people involved.
Once you have a Buy-Sell agreement that works for all parties, it’s vital that it be funded by insurance policies. Some of life’s transitions are hard. Planning now can avoid confusion and chaos later. Protect your business and your family today.
What are the tax ramifications of selling my business?
Business owners need to be concerned with the selling price and associated taxes. Selling any business will have tax implications. We can help you structure the sale to minimize tax liabilities. Is it classified as ordinary income or capital gains? There are many factors to consider. Without proper planning too much of your sale price may go toward taxes.
Under the current law as of January 2021, capital gain tax rate is much lower than ordinary income tax rate. Tax laws may change dramatically under Biden Administration. We advise that you consult with your CPA before selling your company.
We will help you figure out your financial goals and determine the best route for your Sale of Business Planning. We also consider these questions:
Have You Assessed Your Financial Goals?
Did You Obtain a Business Valuation?
Family Business Consulting
Have You Conducted a Retirement Analysis? Do you know whether you can retire from the proceed of the sale of your business?
Has Succession Planning Been Created?
Have You Maximized & Protected Your Business Value?
Are There Any Value Acceleration Strategies?
Has Cash Flow Optimization Been Done?
Do You Have Liability & Debt Management?
Do You Have Incentive Compensation Solutions?
Have You Figured Out How to Transition the Business to a Child or Family Member Successfully?
How Much Do You Want to Devote to Your Charitable Goals?