SELLING YOUR BUSINESS • PART ONE

SELLING YOUR BUSINESS  •  PART ONE  

Preparing Your Business and Yourself for Transition  

Here we begin to look at the process of selling a business. I’ll be breaking it down into a series of steps.  

You didn’t build your business overnight — you have years invested in creating your enterprise, and there’s no reason to sell in haste. Exiting a business should be intentional, with a team of advisors in place to map out a tax, retirement, and income strategy. All of this requires planning and forethought. I have seen this executed properly by starting early, years early and I have seen this done in haste. I was at a luncheon recently talking with a man that had just sold his business, In one week! I asked him a couple of key questions which told me he missed a significant tax planning opportunity.   

Having a plan in place adds direction and gives your family a sound financial structure as you plan out your legacy.  

Selling a business is not a solo event. It’s a team sport, and your advisor is one of the most important players on that team. The larger the sale, the more complex it becomes, which may call for additional specialists that we bring in to help optimize the benefits for you, your employees, and your family.  

I’m laying this out in a series of five articles, from the early planning stages through the sale of your business.  

Here’s Where We’re Going  

In the pages ahead, I’ll lay out what I consider to be seven strategic steps to planning a business transition.  

Step One: Assess Your Financial Needs  

In most cases, your personal and business interests are closely aligned. Selling your enterprise requires a full review of your financial plan — and if you don’t have one, building it is the priority at this stage. No sale should move forward without a plan in place.  

Why? Because this is the stage where the crucial questions get asked and answered. This is where we start.  

• Why are you selling the business?  
• Are you exiting the workforce for good?  
• How will you replace your income once you’ve exited the business?  
• What type of lifestyle do you envision after the sale?  
• How much does this lifestyle depend on the proceeds of the sale?  
• Do you plan to make major purchases or incur significant expenses — travel, a home remodel?  
• How large does your retirement nest egg need to be to safely support your retirement lifestyle?  

This is the point where we need to land on clarity — identifying your goals and objectives and laying them out with your advisor and team. With defined goals and objectives , your advisor can help build and implement the best possible long-term plan aligned with your vision. Clarity also helps shape the terms of the sale itself, leading to the best results for you and your family. As we have seen this step is one of the most important as it will serve as a guide for sale planning, life planning, financial planning and estate planning.   

Considerations  

• What are you most looking forward to in the next chapter of your life?  

• How do you want the proceeds from the sale to support your plans?  

• Have you addressed the sale of the business in your estate plan documents?  

Preparing Yourself for a New Phase of Life  

For most business owners, building and operating a business is a large part of their identity. But stepping away can also create space for new opportunity , when it’s planned out. This could be the start of another enterprise, a hobby that finally gets the time it deserves, a charitable commitment you’d had to pass over, or a new skill — golf, fly fishing, woodworking, art. All of these require time that the typical business owner simply didn’t have available before. Again, this is where we can add real value to the planning process. We have a 100 day play book that becomes a guide path heading into a transition. The process starts well before the 100 days but this guide is the summary document we use.   

There’s no foolproof strategy for managing this transition, but here are a couple of considerations.  

Recognize the Significance of the Transition  

The structure of running an enterprise also gives structure to your life. Moving from structure to non-structure can be a challenging new phase, and it’s normal for it to feel unsettling. The key is managing your way into — and through — this phase.  

Design the First Six Months  

Here again, you need a plan for your money: what’s on hand, how much is coming in, when, and from what sources will your income flow. Things will be changing, how will your health insurance be structured, what are the items that the company provided, a car, phone, lunches or dinners, travel. All of this will change. A financial plan addresses all of this but also goes beyond the how, when, and what — more importantly, it addresses the tax implications of which accounts you draw from and when. If you hold a traditional IRA, Roth IRA, annuity, Social Security, pension, and an investment account, each carries different tax implications that need to be accounted for. Here again, as your advisor we map this out from a tax perspective to get the most tax efficiency from your income streams.  

You also need a plan for your time. What will a day look like? A week? A month? Map out your travel plans. Think through your social plans — who, when, where. Having a general plan helps reduce the uncertainty that comes with waking up and wondering, “What am I going to do today?”  

Here’s a difficult but important question to resolve for yourself — there are no right answers, only what’s right for you: What is most meaningful to me at this point in my life? Have fun with the question. Ask yourself “What if…” as though you have a blank whiteboard to sketch out what your new chapter might look like.  

Draw Outside the Lines  

Building and operating a business typically doesn’t leave much time for the things that require an extended amount of free time to enjoy. Consider an extended vacation, a boat, or that car you’ve been eyeing. This is an area where your advisor can bring real value to your life.  

Keep More of What You Work For.  

This article is for general informational purposes and is not personalized financial, legal, or tax advice. Please consult with a qualified professional regarding your specific situation. Neither Cetera Wealth Services LLC nor any of its representatives may give legal or tax advice.  All investing involves risk, including the possible loss of principal.

There is no assurance that any investment strategy will be successful. Securities offered through Cetera Wealth Services LLC (doing insurance business in CA as CFGAN Insurance Agency LLC, CA Insurance Lic# 0644976), member FINRA/SIPC. Advisory services offered through Cetera Investment Advisers LLC, a registered investment adviser. Cetera is under separate ownership from any other named entity. 

Sean Bracey, Financial Advisor  

Three Pointe Drive, Suite 201, Brea, CA 92821  

(562) 902-6560 | www.Montagewealth.net