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When you’re ready to sell

 

 

 

 

 

 

 

 

 

 

 

 

Cash and dash? Not so fast ...



If you think a sale provides a quick exit, consider this: As part of an agreement with new owners, the founder of an air charter business in Florida agreed to stay on for a year to help train the new owners and even financed a piece of the sale himself with a five-year note.



Planning takes precedence to ensure a smooth transaction

A lot of hard work and planning go into building a business. And when the time comes to sell it, planning is just as important to help ensure things go as smoothly and as profitably as possible. You’ll need to enlist the help of others. And there are also documents that can help present your business in the best light.



Also, start the process a few years before you feel you want to sell. There are many moving parts to a business sale and it takes time to get them all working together.



Begin with a team
 

You probably already work with professionals who can provide you with good advice and objective opinions. These include your attorney, accountant and financial advisor – you may also employ others.

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Together they can help provide a comprehensive view of not only your business’s financial status, and legal and tax obligations, but also your personal finances and how the sale of the business may affect them.

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Adding a business broker to the mix
 

When you sell a business yourself, the sale can quickly become public information. This can upset relationships with employees, customers, suppliers and bankers. A broker, however, can contact owner-approved buyers through a blind profile to help protect your company’s identity.

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Resources are also considerations for enlisting a broker. One important resource, time, is always at a premium when running a business. A broker can enable you to focus on running the business while he or she works on the sale. A broker also brings tools and resources to reach the largest possible base of buyers and can screen potential buyers for financial viability.

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Brokers also have access to business transaction databases that can be used as guidelines or reference points in the valuation of your business. And because a business broker’s only job is to sell the business, this helps increase the chance of closing the deal in less time, helping lower the risk of employee problems, customer defection and predatory competition.

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Remember the recast
 

When selling your business, you want to maximize net income by outlining the owner benefits, net income and cash flow. But the financial statements and tax returns for your small business were probably prepared using all available accepted accounting methods to minimize taxable net income for tax purposes. That’s where recasting comes in.

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A “recast financial statement” is a reconstructed representation of the earnings a buyer would enjoy from the business. It removes not only one-time or extraordinary income and expenses, but also adjusts for accounting anomalies, identifies owner compensation and “perks” (fringe benefits), non-cash expenses such as depreciation and amortization, interest, investments in future growth such as new facilities or expansion, and other common items in private business.

If your sale is a few years away (as hopefully it will be), start preparing recast financials alongside your usual statements and tax returns to help save headaches and money later.

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You’re not alone
 

You and your peers – the owners of 26 million small businesses in America – face a different retirement process than others who have jobs at companies. You own businesses that you will eventually pass along to family members or sell. But with the right team and some smart decisions, your outcome can help fund a promising retirement future.



























































The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete.

Material prepared by Raymond James for use by its financial advisors.

Investment products are: Not FDIC/NCUA insured. Not bank guaranteed. Subject to risk and may lose value. Not a deposit. Not insured by any government agency.