By Dave Driscoll
As a business owner, admitting that you are thinking about selling your business seems like some form of betrayal. How could you consider abandoning something you’ve made so many sacrifices to build? Wouldn’t it be disloyal to yourself, your employees, your customers, your community, and your family to sell a company that is an important part of so many lives?
While these are noble concerns, the fact is that every business owner SHOULD be thinking about selling the business from the day the company is founded. EVERY owner, including you.
Although saying out loud that you are thinking about selling your business may seem daunting, these five key reasons make avoidance even less appealing:
- Corporate structure:
Determining whether your company should be a C corp, S corp, or LLC has significant consequences. C corp owners are usually shocked to learn that the eventual sale of the business will be taxed twice: once at the C corporation level, and again at the individual level when the proceeds are distributed to the individual shareholder(s). If your company is already a C corp, you can convert to an S corp, but the transition must be done at least five years before the sale of a business. Collaborate with your accountant to plan ahead now!
- Financials, financials, financials:
The most important factor prospective buyers consider is historical financials. Make it easier on yourself to tell the story of your business growth and cycles by maintaining accurate financials. Also track your discretionary spending. You don’t want to be forced to re-create years of financial reporting when you’re eventually in the middle of trying to woo a buyer.
The bonus: Accurate, timely financial reporting will help you run your business more efficiently and profitably in the meantime.
- Owner dependence:
Healthy companies do not rely heavily on owner involvement. And to be blunt, owner-dependent companies do not sell for top value. Develop strong leadership within your company. Grant leaders the real authority to make decisions without clearing every little thing with you. Empower your employees to make improvements and to recognize how their roles contribute to the company’s success. You will likely be pleasantly surprised by the dedication and ingenuity this generates. Take frequent vacations to test that the company is capable of performing well without your constant supervision.
I would bet that “business owner” is a large part of your personal identity and self-esteem. That is obviously understandable, but there is more to life – and more to you – than your business. Embrace the flexibility that being the owner brings and develop other interests. What would you do if you didn’t have to work tomorrow? Do it! What causes inspire you or have special meaning to you? Volunteer to support those causes with your expertise and energy. Build a network of friends and associates outside of your office and your industry. Too many owners wake up soon after selling their businesses to realize they really don’t know who they are or what to do without that business. Instead, create a balanced, fulfilling Life Beyond Business™ for yourself. Now.
- The big “what ifs”:
We are not fans of fearmongering, but as John Lennon said, “Life is what happens to you while you’re busy making other plans.” None of us know what is just around the corner. From happy opportunities like an unexpected buyer or a move to be near family, to the morbid realities of illness or disability, it is wise to always be prepared to sell your business tomorrow. Even if you believe that you will never want to sell your business, there is a strong probability that someday, something will come along to change your mind.
There are very few guarantees in life, but eventually, you will leave your business, one way or another. Realistically preparing for that fact in your daily processes and activities will benefit you and your business. Procrastination is your enemy. Bolster the elements within your control, knowing that you are protecting the value and legacy you’ve created.
Dave Driscoll is president of Metro Business Advisors, a business brokerage, valuation and exit planning firm helping owners of companies with revenue up to $20 million sell their most valuable asset. Reach Dave at [email protected] or (314) 303-5600. www.MetroBusinessAdvisors.com