Planning for Business Owners
The decision to retire from a business you have built and put your heart and soul into isn't an easy one. Most business owners feel very attached to their companies. And why shouldn't they? When you create something so extraordinary it is a major achievement of your life. A successful company is more than just a job. It is a reflection of your accomplishments. We understand this and know that making a decision to sell can be a very difficult step for a business owner to take.
But everyone needs to let go at some point. The question about whether you should sell your business shouldn't be about IF you're going to sell, but rather about WHEN is the best time to sell. You wonít live forever and it is important to plan for this very definite future event.
Too often we find owners that are attempting to hold onto a business until the last possible age at which they feel capable of running it and then the unexpected occurs such as a serious health condition or a business related problem that affects the ability to sell for full value. Many times when we are contacted, the business owner is already in serious trouble and we frequently hear "I should have started this process years ago".
If you are at or near retirement age we strongly advise you to consider beginning the steps needed to sell your business. Why? Here are some specific points to consider:
Health Concerns: Donít wait until your health forces you sell. Putting yourself in the position of having to sell for health reasons could possibly have very negative consequences. Here are some examples.
1. Buyers may learn of your health problems and believe that you will be far more flexible in your price and terms than if you were healthy and werenít forced to sell.
2. If you will be needed to stay on with the business due to your special expertise and experience, buyers may be less willing to buy knowing that your health situation may cause you to be unable to assist with a smooth transition.
3. A successful sale may take longer than you expect and you may be in a race to sell at unfavorable terms before your health problems eventually force you to leave your business and either run it with a less-capable manager or shut it down completely.
4. If you sell after your health begins to decline, you'll miss out on getting the most out of your retirement years. Most retirees look forward to traveling and being active at this time of their lives.
Economic Factors: One never knows how the economy and competition will affect business in the future.
1. How many could have predicted the economic bust in 2007-2008? Even if your company is not doing as well as it once was, how can you be sure that it will do better if you wait longer? You should sell your business when it has established profitability. If now is that time then consider selling when the going is good even if it isnít the best ever.
2. Your competition could change. If the competitive environment for your business is good now, can you be certain that more competitors wonít move in and cause a reduction in your sales revenues and profit margins, which may cause your business to sell for a much lower price in the future?
3. The product or service that you sell may become less necessary or desirable in the future as consumers change their consumption habits or needs. You always want to sell while the going is good because you never know what the future will hold.
The Baby Boom Effect: You are a baby boomer if you were born in the Post-World War II period from 1946 to 1964. The first baby boomers hit the age of 65 in 2011.
1. As time goes on more and more boomers will reach retirement age and put their businesses up for sale. In the next 10 years, the U.S. economy will experience a record number of businesses for sale as baby boomer owners begin their retirement. The result will be a huge increase in the number of businesses for sale.
2. An increase in the number of businesses for sale may cause significant downward price pressure in the business-for-sale market. Buyers will have many more business purchase options to choose from. We will likely enter a market that strongly favors buyers at some point.
3. Most baby boomer owners have the bulk of their assets tied up in their businesses and are planning to use the proceeds from the sale to fund retirements and to pass assets along to heirs. The longer you wait, the more you risk your family's economic future.
We realize that selling a business you have spent years developing and nurturing is a difficult decision to confront, but we feel it is vital that we pass these points along so you can consider them as you make the very important decision of when the appropriate time is to sell your business.
Steps to take now: If you are a business owner at or near retirement then you should consider the following steps:
1. Talk to your accountant.
Have you had this discussion yet? Your accountant will likely have very
beneficial tax advice for you. This is really important.
Thanks for listening! If you would like help with the sale of your business please contact us as soon as possible.