updated December 2022
As a business owner, you’ve spent years investing your time and energy into growing a successful business, but maybe you feel ready for the next step. Closing this chapter is bittersweet enough without considering the financial implications associated with it. With many factors to consider in order to maximize both the short-term and long-term financial benefits of the sale, it’s important to gather a trusted team of professionals to help guide you through the process. We’ve rounded up three of the most important factors to consider as you plan to sell your business.
1. Hire the Right People.
Who will help you maximize the sale of your business? There are many different professionals who can lend their expertise in order to make the sale successful. When you sell a business, you’ll likely need help planning for taxes, your estate, investments, and more.
Once you determine your team, you also need to decide on your level of involvement. Will you make introductions and then step back to let the different members do their respective work and coordinate with each other when necessary? Or do you prefer to be more involved and serve as the point person connecting each professional? The aftermath of selling a business is far less frightening with the right team in your corner!
2. Establish your source of income.
How will you optimize cash flow after the sale? What does your income look like after you sell a business? Until now, your business was the sole source of income fueling your lifestyle. It’s important to consider how you’ll turn the after-tax proceeds of the sale into future cash flow to support the lifestyle you’re accustomed to.
For example, there are considerable tax savings when you fulfill charitable intent as part of the sale of your business. If you give company stock to charity prior to the sale, you avoid gain on the stock AND receive a tax deduction. The tax savings on this strategy can be significant!
Ultimately, your financial advisor can help you plan for tax savings, understand the bottom-line proceeds you’ll get from the sale, and help you maximize your after-tax proceeds so you can maintain a comfortable lifestyle in the years to come.
3. Determine what this sale means for your family.
It’s important to consider how selling your business affects your family – especially if it’s a family business. If you have a child or another family member working for the business, you’re in charge of how much they know about the sale. Will you modify your estate plans for an equitable inheritance between children that worked in the business and those that didn’t?
It’s important to think through questions like these ahead of time in order to ensure a smooth transition for your family. You’ll also want to consider WHO you’re selling your business to. Is it a business partner or close acquaintance, or are you selling it to a third party? Charles Schwab, our third-party custodian, offers three different recommendations on how to transfer ownership.
Now that we’ve identified some of the big-picture items to consider as you determine how to sell your business, here’s how a financial advisor can help you throughout the process:
1. They can help cut through the noise.
A skilled financial advisor can help you sift through the overwhelming amount of options available to you during the sale of your business. They have a thorough understanding of your personal finances and can factor in how the sale of your business will affect your financial future. They’ll help you clarify your goals and expectations after the sale, identify pros and cons of different options, and enable you to make decisions in your best interest.
2. They can help you create and communicate a plan for your family.
Your financial advisor can help you understand and integrate the different components of selling your business (cash flow, estate planning, etc.) into one comprehensive picture. This will help you determine how the technical aspects of the sale of your business will affect your family going forward.
Your financial advisor can also help you communicate the details to affected family members. You don’t have to share every detail of the sale with every family member, but having a plan in place will allow you to provide pertinent details to those involved.
3. They can help you anticipate and prepare for challenges.
It’s easy to get caught up in the technical aspects of selling your business. There’s so much to plan for and consider, even with your trusted team of experts helping you along the way. That being said, it can be easy to overlook the emotional side of selling your business.
Even if you’re ready to sell, it can be difficult to transition out of owning a business you’ve poured yourself into. Financial advisors have the experience to draw from and will share examples from past clients, the emotional challenges they faced, and alternatives they created to find fulfillment after the sale of their business. This objective opinion will help you consider the best ways to plan for and spend your time after the sale, whether that be charity work, joining boards of different companies, or traveling!
Teaming up with a financial advisor as you sell your business will help you focus on your goals and create a smart plan for you and your family’s financial future. Here’s why you should partner with Foster & Motley:
1. We’re experienced.
We manage over $1.5 billion in assets for over 600 families. Our advisors have had experience with clients who have previously sold a business, which means they’re ready and able to help you understand how to sell your business with a solid plan for your financial future.
2. We’re credentialed.
Our team carries the highest designations in our industry, including CFA®, CPA, CFP®, and more. These credentials require our staff to continually educate themselves so we can stay current with the best training in order to best serve our clients.
3. We personalize.
We take a unique, comprehensive approach to all things wealth management. Every client at Foster & Motley has both a dedicated financial planner and an investment manager. While your financial planner helps you with the sale of your business, your investment manager will continue to monitor and balance your investment portfolio.
Plus, our client-to-advisor ratio 20:1, which is nearly twice as good as the industry average (39:1). That means you’ll be working with people who have the time and energy to focus on your unique financial needs.
Taking a careful, considered approach as you determine how to sell your business will help set you and your family up for long-term success. Your financial advisor can help you stay on the right track, clarify and plan for your financial goals, and communicate your plan to your family, overcoming challenges throughout the process.
If you would like to learn more about how Foster & Motley can help you understand how to sell your business and plan for your financial future, contact us today.