Updated: Jul 8
You have worked hard to build your business and spent a great deal of effort to attract talented employees, take care of your customers, and support your family and community. Now you are considering a sale. Here are three aspects to consider:
How will you spend your time after selling your business?
Do you want to take some 'chips off the table' and set aside some of your wealth from the business while still being involved to serve your customers and collaborate with your employees? Or, do you want to exit completely and start another career or business? Or, are you ready to stop working and volunteer in your community, travel, or spend more time with family?
Many successful business owner's lives are so intertwined with their business, that it can be challenging to go from 110% to zero.
Consider your transition options and how you will feel about working less. One option could be serving on a non-profit or for-profit board to stay intellectually engaged. Have discussions with trusted friends, advisers, family members, and colleagues before planning your exit.
What does a sale look like?
Do you want to sell to a private equity firm or a competitor and maximize your proceeds? Have you considered what that might mean for your employees or your local community? Would you like to sell to your management team, key employees, or family members? Do those folks have the resources to purchase the firm? Are you willing to finance part of a sale? Or, do you prefer to walk away 'clean' with your proceeds?
Depending on the revenues, profits, and industry of your business, each of these may be a viable avenue. One often overlooked exit strategy (if you have 20 or more employees and stable or growing profits), is a partial or full sale of the business using an Employee Stock Ownership Plan (ESOP). There are also options available from family offices that are looking for minority investments in well run businesses that will keep management, whether yourself or key team members, in place.
Will the proceeds to support your lifestyle needs and core values?
Your financial adviser and accountant can determine the after-tax and post debt re-payment proceeds you can expect from a sale. Your financial adviser or wealth manager can project the income you can expect from investing in a portfolio of stocks, bonds, cash and real estate; advise on strategies and timelines for donating money to the charity of your choice; and navigate what trusts to set up for your children or grandchildren. One important consideration is whether you will need proceeds from a sale immediately to support your living and enjoyment expenses, or whether the proceeds will be set aside for future generations or a charitable cause.
How to get started: Develop a plan with your financial advisor.
A trusted advisor will help clarify your financial and lifestyle goals. Your advisor can assess whether the proceeds from a sale will support your lifestyle goals. He can help evaluate whether the buyers you consider align with your company and business values. A good financial advisor can help you understand the pros and cons of sale options whether: a private equity buyer, strategic acquirer, family office, investment bank or broker, or an ESOP transaction. Leading up to and after the sale, your advisor can assist you with estate planning, investment, and family wealth preservation strategies to meet your asset protection, philanthropic, and financial goals.
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About the Author
Peter Newman is a Chartered Financial Advisor (CFA) and president of Peak Wealth Planning. He works with individuals nationwide that have accumulated wealth through company stock, ESOP shares, real estate, or running a business. Peter applies his unique background to help clients achieve their specific goals and enjoy peace of mind.
Peak Wealth Planning provides concierge services to meet your wealth management needs. Services include: financial planning, investment management, esop diversification, retirement income, insurance and estate planning advice, Peak Wealth Planning is a fee only financial advisor based in Champaign, Illinois.