To get ready to sell your business, you will need to start preparing years in advance. It’s like wanting to sell you home, you don’t know when, but you know you wish to sell it. It could happen years from now or it can happen tomorrow. Key to Success of selling your business! Be ready at all times !
Some things to decide
This is not a complete list, but it is a list of things to start the process of selling your business and marketing decisions.
Establish preliminary exit objectives
- Prepare for life after retirement
- Get market information
- Start working on your team-intermediary, investment banker or broker
- Review value drivers and what to do to enhance them
- Get your employee prepared
- Start your tax planning (this takes time to position yourself and organization
- Implement the incentive plans and stay bonuses
- Market to potential buyers
- Establish a departure date
- Define what you need for your financial security from your business
This is only a brief list of what you need to start working on before you sell your business. Keep in mind that the sooner you start the better the chances or selling with more potential profile. There is a lot of work to do if you wish to extract from your business the highest possible potential profit from your business.
The sale of your business to an insider requires the simultaneous presence of a capable insider purchaser coupled with your intention to exit. The reason is the “capable insider” who wishes to purchase your business is not interested in hanging around forever waiting for you to decide to sell. Without a solid commitment from you on the timing of your exit, prospective purchaser will ultimately become disinterested.
There is also the possibly of you having to finance part of the purchase price. Chances are that you will be helping finance part of the sale, which represents actual years after your exit, which you are tied to the company.
Using a two-tier system for the purchase of your interest!
Under a two-tier purchase system, a portion of your stock would be transferred to your inside buyer initially, and the balance would be transferred when the business is sold.
By using the two-tier purchasing system, there are a number of advantages:
- Providing stock ownership to a key employee today can provide incentives for better job performance.
- It can help reduce the risk that they will be attracted to a job offer from a competitor and ultimately leave you with your company secrets.
- Improves the likelihood of a bank financing the balance of their purchase in the future at your final exit.
- It gives them “skin in the game” when they contribute some of their funds to purchase some of the stock, giving them additional motivation to help the company be successful.
- Allows you to become a mentor to your key employee to further develop their skills under your watch, while still controlling the company.
Continue reading “Planning For The Tax Efficient Insider Sale!”