We have had the privilege of working with many business owner clients. We feel we bring an uncommon level of experience with the financial and personal elements unique to the sale of a business. Our first piece of advice usually is – Start your exit planning today. As we all know, all privately held companies will execute an exit plan one day, so you might as well do it on your own terms that are in line with your goals and objectives.
First, unexpected events such as health issues, market disruptions, or changes in personal circumstances can force business owners into rushed or unfavorable sales. Early exit planning helps mitigate these risks by creating contingency plans and protective measures. By having a comprehensive exit strategy in place, owners can better protect and preserve the value of their business, ensuring they don’t have to settle for suboptimal terms in a hasty sale.
Secondly, by starting the exit planning process early business owners have more time to enhance and maximize the value of their business. This can involve implementing strategies to increase revenue, improve profitability, strengthen operations, and build a solid management team. These efforts can significantly boost the business’s overall value, which translates into a higher sale price when it’s time to sell.
Early exit planning also helps business owners choose the optimal time to sell their business. They can closely monitor market conditions, industry trends, and economic factors to identify a favorable window of opportunity. By selling during a period of high demand or when the business is performing exceptionally well, owners can negotiate better terms and attract more potential buyers, leading to a higher sale price.
Next, early exit planning provides an opportunity to engage in tax planning strategies that can help minimize the tax implications of a business sale. By working with tax professionals and advisors, owners can identify tax-efficient structures, utilize available exemptions and deductions, and explore options like installment sales or ESOPs (Employee Stock Ownership Plans) to optimize their after-tax proceeds.
It is also important to coordinate estate planning efforts with the sale of businesses as estate planning can be a time-consuming process. Items to consider include reviewing and updating a current estate plan, establishing trusts to distribute wealth to future generations, thinking through family dynamics such as family members involved in the business, evaluating life insurance, and planning for philanthropy.
In summary, engaging the right advisors and planning early can help business owners safeguard against unforeseen circumstances, maximize business value, strategically time the sale, optimize tax outcomes, and execute estate plans. These are the necessary planning steps to help you exit on your own terms and reach your financial and personal goals.
Disclosures
This material is provided by Gryphon Financial Partners, LLC (“Gryphon”) for informational purposes only. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy or investment product. Facts presented have been obtained from sources believed to be reliable. Gryphon, however, cannot guarantee the accuracy or completeness of such information. Gryphon does not provide tax, accounting or legal advice, and nothing contained in these materials should be taken as tax, accounting or legal advice. Individuals should seek such advice based on their own particular circumstances from a qualified tax, accounting or legal advisor.