The more you make the business about you , the less valuable your business becomes . The phrase “ absentee owner ” speaks volumes when selling a business . Hire good people , train them right , allow them to learn , succeed and fail — and that will put you in the best position to sell your business . You should be able to take a month off and your business should not miss a beat .
3 . File your taxes properly Third , don ’ t get too crafty with your taxes . You would be surprised what I see business owners do with their books . All the personal expenses they run through their business , all the tricks they do to avoid paying taxes . Guess what ? Banks , when lending money ( Small Business Administration 7a loans are the most common financing vehicle for buying a business ), lend off the tax returns . So if you are showing little to no income on your taxes , don ’ t expect a bank to rush and lend a buyer money to buy your business . Sure , they will add back some of those expenses , but not nearly as many as you think .
4 . Set your buyer up for success with proper documentation Fourth , and many business owners cringe when I say this : You need to document the things you do in writing and ensure your employees follow the processes and procedures that you put into place . When someone buys your business , things like internal knowledge are terrible to have . Documented procedures are amazing , allow for consistency in the way you do business and help with employee turnover , as new employees will have a process to follow and procedures to help train them .
5 . Make a plan for personal fulfillment after retirement Fifth , have a game plan for what you want to do when you retire or sell your business , and know how you want to live . I see countless business owners who claim they want to retire but have no idea what they really want to do once it happens . Not having a plan may lead to one thing — misery . As a business owner , many of us value ourselves on our business accomplishments , and your “ hobbies ” are your business , business , business . In that order . When that is no longer there , many former business owners struggle with trying to decide what to do next .
6 . Calculate your sale to live comfortably And lastly , know how much money you need out of your business . For many business owners , their retirement is embedded in their company , and they are expecting a windfall of money from the sale to help them sail off into the sunset in retirement . Many times , they don ’ t take into consideration the taxes that have to be paid on the sale and have never sat down with a financial advisor or exit strategist to figure out how much money they need from the sale when they sell their business . Without these upfront calculations , business owners are often shocked and surprised at the tax bill they must pay , and when everything is done , feel as though they don ’ t have enough to live comfortably .
There are many ways a business owner today can extract money from their company in a tax advantaged manner to not “ need ” as much on the sale of their business . We call that financial freedom , and it gives the business owner much more flexibility during the sale .
Owning a business can be a great joy , and selling a business can be even more fun if done correctly . Take time now to prepare , and you won ’ t regret it later .
Brett Sargent and his wife , Adriana , are the owners of True North Consulting , which specializes in executive coaching , exit planning , business brokerage and business lending . They own two franchises ( Sunbelt Business Brokerage and Lendio ) and have coached over 150 business owners , funded over 100 businesses and sold over 50 businesses in the Greater Sacramento region .
“ The more you make the business about you , the less valuable your business becomes . … Hire good people , train them right , allow them to learn , succeed and fail — and that will put you in the best position to sell your business ."
Brett Sargent , owner , True North Consulting
How have you prepared to sell your business ?
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August 2022 | comstocksmag . com 23