By David Shapiro, Director, CLA
Transitioning or selling your business can be the most exciting time of your career — or, because you only have one chance to get it right, one of the most challenging.
Whether you're considering retirement or looking to diversify your wealth, learn how thoughtful business transition planning can offer a path that aligns your personal and professional goals.
When to sell your business
How do you know when it’s time to sell your business? The signs may be different for every owner and the reasons are often personal. And this decision can be nearly as important as the decision to go into business in the first place.
Personal reasons
One of the most common reasons for selling a business is retirement, and statistics from the U.S. Census Bureau indicate an aging demographic among business owners.
Health reasons
Managing a business while dealing with health challenges of either the owner or their spouse can become unsustainable, prompting the decision to sell.
De-risking wealth
Many owners have their wealth concentrated in their business, which can be risky. Selling the business can help diversify assets by spreading net worth across various investments.
Business considerations
Factors like revenue stability and growth potential are crucial. Companies that have stabilized after periods of volatility may find it a favorable time to sell.
What’s involved in business transition planning?
Planning to transition your business is a complex process — and it goes beyond the actual transaction and business terms. From assessing the current state of the business and market conditions to identifying your personal motivations and monitoring risk, having a detailed business succession plan and an experienced team of professionals can help set you up for a smooth and successful experience.
Judging timing and market conditions
Timing is critical when selling a business. Economic conditions, interest rates, and changes in tax laws can all impact the decision to sell. A strong economy generally leads to higher valuations and increased M&A activity.
Engaging and retaining team members
Maintaining open communication with employees during the transition is vital. From leadership succession decisions to retention strategies, consider how to engage key team members, as their involvement can significantly impact the success of the sale.
The mergers and acquisition process
The typical M&A process generally takes six to eight months, but a comprehensive business transition process looks at more than the actual transaction. Key steps for the M&A piece of the plan include:
- Preparation of confidential information memorandum
- Approaching potential buyers
- Indication of interest
- Management presentations and due diligence
- Letter of intent
Who do you need on your business transition team?
Professional owner transition advisors can help anticipate and address problems so that your transition is a well thought out event. They can help you lay out a plan that incorporates what matters most to you:
- Providing for your family and your business in the case of tragedy
- Family dynamics surrounding asset and ownership transfer
- Preparing for a successful business transfer to employees, heirs, or outside buyers
- Positioning the business for a profitable sale or merger
- Safeguarding continued business growth
- Securing your legacy in the community
- Retaining enough assets to fund your retirement
Ultimately, the decisions you make ahead of the transition can have a long-lasting impact on the business after you are no longer involved. Having a close connection to a team of professional advisors can alleviate much of this burden.
When assembling your team of advisors to help implement your transition plan, look for a team with capabilities for:
- Business transfer strategies
- Comprehensive succession planning
- Financial and estate planning
- Insurance and risk management
- Business valuation
- Sell-side due diligence
- M&A advisory and investment banking
- Strategic tax planning
Your team of advisors can help you, your family, and your employees prepare for a healthy, productive, and smooth transition.
For more information on business transitions for franchisees, contact Brian Baumgart at [email protected] or 414-721-7659.
The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, investment, or tax advice or opinion provided by CliftonLarsonAllen LLP (CLA) to the reader. For more information, visit CLAconnect.com.
CLA exists to create opportunities for our clients, our people, and our communities through our industry-focused wealth advisory, digital, audit, tax, consulting, and outsourcing services. CLA (CliftonLarsonAllen LLP) is an independent network member of CLA Global. See CLAglobal.com/disclaimer. Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor.