Selling the small business you’ve built for years is like watching one of your children graduate from school—your rearing is done, and now it’s time to let go.
It is also a complicated process that you cannot go through alone. How will you know if the business is selling for what it’s worth? Will the proceeds be enough for you to retire early? How much will you need to pay in taxes? These questions will be answered by the professionals who will help you sell. Those pros are:
It may seem like a good idea to use your regular business attorney during the sale process of your business, since he or she already knows the ins and outs of your company, and you trust them. But you are doing yourself a disservice if that attorney doesn’t have extensive and up-to-date experience in reviewing mergers, acquisitions and transactions, says Greg Caruso, principal at Harvest Associates LLC, a transaction advisory firm in Baltimore.
“I once sold an engineering firm for $1 million, and while it wasn’t the hugest deal, it was complex because of the liabilities,” he says. “You need an attorney who understands the complexities [of a business sale]—and who can get the paperwork right.” If your lawyer does not have the credentials and you end up hiring someone else to evaluate the sale of your business, keep your regular lawyer in the loop throughout the selling process.
As a small business owner, you probably already have an accountant on retainer or on staff. While he or she is essential to the day-to-day bookkeeping and tax filings for your company, they may not be well-versed in the tax code related to business transactions. “Some owners are shocked when they find out they’ll be taxed on the proceeds of a sale,” says Phil Corbin, a business broker with Henderson Business Group in West Des Moines, Iowa.
In addition to understanding this part of the tax code, a specialized accountant can also help structure the deal to give you a favorable tax outcome. So while it’s a good idea to keep your day-to-day accountant involved, you should hire another accountant to review any offers or final sale agreements.
If you don’t have a buyer in mind—such as a family member, top manager, co-owner or competitor down the street—then you’ll be selling the business on the open market. That’s when you need to hire a business broker to spearhead the process, says Caruso—from listing your business on the market to placing a value on your company. The broker acts as an intermediary between you and buyers, and coordinates everyone else involved in the process.
If you’re nearing retirement, or the sale of this business will greatly affect your personal financial situation, bring your personal financial adviser into the ring. After the attorneys and accountants have reviewed a sale agreement, your financial adviser will be able to shed light on how the deal could be better structured to benefit you.