We can help you you sell a business or other asset without the capital gains taxes that may equal 38% of the value. As a firm staffed with business and tax planning professionals, we have solutions to the issues that most frustrate buyers and sellers of appreciated assets.
We can typically find ways to design transactions to generate tax savings many times more than the legal costs.
WITH OVER $7 BILLION IN M&A ACTIVITY SINCE 1985, SHOULDN’T YOU LET OUR EXPERT TEAM GUIDE YOU THROUGH THE COMPLICATED PROCESS OF EXITING YOUR BUSINESS IN THE MOST TAX EFFICIENT MANNER POSSIBLE?
“You Must Know Your Destination Port If You Wish to Catch A Favorable Wind”
– Seneca (Roman philosopher 50 A.D.)
When considering the failure rates associated with starting and running a business, it comes as no surprise that the successful enterprises are those whose owners, directors, and partners have given a great deal of thought in the designing of a business plan, understanding their market sector and any niche’s that may need servicing, finances, and every other imaginable consideration in the starting and running of their business.
The issue is that far too often, the planning stops there with little to no consideration being given to the various stages of the life cycle of a business.
Every business, and its associated ownership/management, needs to have exit planning in place to fully benefit from all the effort they have put into their business.
Without proper planning the eventual sale of the business and or its assets will never realize its full potential and the ownership will never experience the wealth that could be derived out of their efforts.
The point of the quote is to comment on the fact that you need to know where you’re going to most effectively get there. To experience the greatest levels of success possible, there needs to be planning involved in every stage of the life cycle of a business; and among the most important stages is the exit, the eventual sale of the business, shares, and/or assets.
We cannot anticipate when an illness or death will strike, when market conditions will shift and or when any number of circumstances may occur that will impact the timing, need, or decision to sell a business – but if that business is prepared with thorough exit planning strategies, no matter what the circumstances, the business and its ownership will be prepared to realize the fullprofit/income potential at this stage in the businesses life cycle.
Step 1. Exit Age
Start by identifying the age when you would like to be completely out of the business.
Step 2. Length of Earn Out
Estimate the length of time you will need to stay in the business during an “earn out” or transition period after the sale of you company. The average earn out is 3 years in length but it can vary.
As a general rule, service businesses have a longer earn out period, sometimes up to 5 years. Product or technology businesses have shorter earn out or transition periods that may be as short as 2 years, and in rare cases 1 year. If you’re not sure, 3 years is a good assumption.
Step 3. Length of Transaction
Estimate how long the transaction will take to complete. By way of a benchmark, the process of marketing a business for sale, negotiation to an agreement in principal, and the completion of due diligence takes approximately 1 year from start to finish.
Step 4. Getting the Business Ready to Sell
Estimate the length of time it will take to get the business ready for sale. This could include projects like identifying a scalable offering, creating a recurring revenue stream, reducing customer concentration, ect.
An acquirer will want to see at least 3 years of operating results after any major strategic change: therefore, you should allow at least 3 years after a major strategic change before putting the business up for sale.
Step 5: Plot each milestone from steps 1-4