Howe & Rusling Wealth Management


A Few Considerations to Help Prepare for a Business Sale

Vince Carson, CPA, Financial Planner

Hello and welcome to today’s episode of Street$marts, with Howe & Rusling. I’m Vince Carson, Certified Public Accountant and Financial Planner at Howe & Rusling. In today’s episode we are going to be discussing a few key items that might prove useful when preparing to sell a small business. 

When developing an exit strategy, the first recommendation is always to start early. It takes time, energy, and capital to create the right exit plan for your business. Having “enough room to run” will certainly help you in this endeavor.

The area which business owners generally fixate on, for good reason, is the “sales price”. So, what can a business owner do to finesse a more desirable selling price? Let’s talk about a few simple strategies to employ…

  1. Bump up that Income: Put a different way, make your best attempt at increasing gross profits for the few years leading up to the business sale. By consciously improving the company’s gross margin, even by a small percentage, the result could lead to a higher sales price.
  2. Tidy up the Books: Potential buyers will certainly be asking for the company’s financial statements and tax returns. Three years of records is generally the period which buyers are interested in. Beyond improving the gross margin of the company for the years leading up to the sale, buyers want to have faith in the accuracy of the financials. Therefore, consider employing a CPA firm to conduct a financial statement review. This will provide potential buyers with a degree of faith that would otherwise be elusive. Beyond having reviewed financial statements, it may be beneficial to have a formal valuation or business appraisal done. This will provide you with insights as to the market value of the business.
  3. Look Presentable: If you’ve ever sold a house before, you know that the first thing to do is make everything look pleasant to look at; repairs are made, and everything is cleaned. Likewise, when your business sale is approaching, consider taking similar action. Think about whether the parking lot needs repaving, whether the roof has areas that need repair, and certainly make the inside office space look as pristine as possible. Perhaps even more importantly, this logic applies to the company financial statements. Certain types of accounts may draw attention, such as shareholder receivables and loans, or A/R that’s more than 90 days outstanding. Through starting the exit planning process early, loans to or from shareholders can be paid off, and A/R collected.
  4. Have a Deep Bench: Selling a business requires critical thinking and carefully calculated decision making. Having the right team will help you navigate the pitfalls of succession planning. When thinking of your team, it should include the following… 
      • First, a Business Attorney: From a legal perspective, you want someone on your team that can review sale documents and ensure everything is in good order.
      • Next, you’ll need a good Tax CPA: Navigating the labyrinth of the United States Internal Revenue Code is essential to avoiding a landslide of taxes. When a sale proposal comes in the door, you want someone on your team that can crunch the numbers and provide you feedback on the tax implications.
      • And finally, don’t forget your Wealth Advisor: You want a good quarterback for you team. You’re looking for someone that can guide you through the business sale process. You’re looking for someone who will put your interests first. While your business attorney and tax CPA covers your flanks with regards to legal and tax considerations, a wealth advisor brings it all together. Wealth advisors can help in the negotiation of the business sale, can create a retirement income strategy for the retiring business owner, and help manage the proceeds from the sale.

Our team at Howe & Rusling understands that business owners dedicate their entire lives to making their company a success. If you’re nearing the finish line, and have any questions about preparing for an exit plan, give us a call. We’re here to help.

Thank you so much for tuning into today’s episode of Streetsmarts with Howe & Rusling, and we hope to see you next time.



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