Selling your business and sailing off into the sunset is the top goal for most business owners.
But time and time again, I see business owners make the same mistakes when it comes to the sale.
Here are the 6 most common ones so you can avoid them:
It's so easy to get caught up in the sale process that you forget to plan before it’s finalized.
Many believe that they can just do the best tax planning once they know the sale is coming, but this is not true.
The second that LOI (letter of intent) is in hand you have lost a ton of great tax planning.
Tax planning needs to be done years ahead of the sale if you want to maximize the tax savings .
I often see business owners sell as soon as the first offer comes in—they get struck by the money and just say yes.
When in reality, the business is on an upward trend and 1-2 years more of building could bring in a lot more dollars.
The first offer is rarely the best offer.
I know it's exciting, but take your time.
You only get to sell it once so you want to get it right.
Surprisingly, It's not always about the money.
I'll see business owners sell part to some group and they go from loving what they do to hating running the company real quick.
Be smart here and don’t only take the highest offer.
Take the right offer, especially if you are only selling part of the business and staying on.
If you do not have a team on your side and the buyer does, they are going to win.
They will find ways to drive down your valuation, so you need people in your corner who can help negotiate and make sure this does not happen.
This all starts with good financials.
I work with someone who thought their company was worth $80mil but they had horrible financials.
Because of this, they could not tell the story.
Offers were coming in closer to $30mil. So they hired a new financial team and within a year were able to get that up to $70mil.
Moral of the story: Invest in good financials NOW
Way too many business owners put personal items through the business, whether it be travel, cars, and other personal expenses.
This might sound good in theory to help lower your taxable income (even though many times it is not by the book and could come back to bite you), but this ends up reducing profit which can reduce your business valuation.
Be smart here. Years leading up to the sale, you do not want to drive down profit to save on taxes.
You want your profit to look as solid as possible.
So often, business owners just want to get this thing sold.
They don't think about whether they want it to be an installment sale, asset purchase, or equity sale.
But the way you sell makes a big difference on how you are paid & how you are taxed.
Some offers will include part of your equity rolling into the new company vs being bought out.
I've seen this go incredibly wrong.
One person I met rolled up 50% of their equity into the new business and it failed within 2 years.
$20mil+ gone...
Think about the long term effects before making a decision.
These are the 6 biggest mistakes I see around selling your business, try and avoid these as best as you can.
.webp)
Financial Advisor