The most critical decisions about selling your business are the ones made well before any potential buyers have been contacted. Achieving a high valuation and minimizing taxes certainly matter. But these issues are secondary to answering questions about what you are ultimately trying to accomplish—for the company, yourself, and your family. The answers to these questions are vital in determining whether a transaction makes sense for you. It is important to be working with a wealth advisor at this point to help you think through the implications of what you discover in this exercise.
For businesses with multiple owners, it is also important all owners think through these questions. By understanding each party’s goals and identifying potential conflicts, owners and their advisors can better create a strategy for an optimal outcome.
Here are 10 questions to consider before selling your business:
- What is my motivation for pursuing a transaction? (What am I looking to accomplish?)
- What are my goals from a personal wealth planning perspective, in terms of retirement, transferring money to younger generations, and philanthropy?
- What level of assets and liquidity are needed to achieve those goals?
- What are my goals for the future of the company?
- When am I looking to generate liquidity?
- Where is the company in terms of its life-cycle and future growth opportunities?
- How will the transaction impact our employees and our community?
- Do I want to stay involved in running the company post-transaction? (Do my family members and younger generations want to be involved in the company going forward? Are there potential successors?)
- How much longer do I want to be involved in managing the company?
- Am I emotionally prepared to transfer some or all control of the business to an outside equity partner? (If so, what characteristics am I looking for in a potential investor or partner?)