Last month, our blog post focused on the first of two important considerations when selling your business. We looked at determining the personal goals you have in mind after the sale and how these desires will affect the process of the sale. This month, we will shift to a complementary objective – the financial goals you expect from the transaction.

Just as your personal goals will guide your thought process over the sale of your business, you will need to identify the financial results that your transaction should provide. The financial goals you set will need to take into consideration your current and future lifestyle needs. These details will also factor into the selling process in numerous ways, so it is imperative that you assess accurately and prepare accordingly.

Identify Your Current Financial Situation

Once the sale of your business is complete, the primary source of your income will change. So, a natural first step in this process is to determine your current financial position, especially any ongoing financial obligations that will not end with the sale of the business.

When analyzing your current needs, it is important to consider any requirements that come from family members as well. The complete picture must be examined thoroughly now so that unforeseen financial problems do not arise in the future.

Questions worthy of consideration:

  • Have you completed a household budget?
  • Will the sale pay off any outstanding debts related to the business?
  • Are there other personal financial commitments that the sale can satisfy?
  • What health care needs might arise that will require significant funding?
  • Who is dependent on me for support, and at what level?
  • Vacations?


Rely on Your Independent Valuation

An earlier blog topic discussed the importance of an independent valuation of your business to assess a proper current range of value. At this point in the process, this information will be essential for creating a plan that will provide for the needs and desires that you identified above.

Questions that can guide this step:

  • How does my business compare with others in the industry?
  • Are there any characteristics of my business that detract from its value?
  • What is the outlook for the entire industry?


Lean Into Your Wealth Manager

Using your projected financial needs and the independent valuation, call on your wealth manager to help you assess your entire portfolio of assets to include your business, its sale, and other resources. Your wealth manager will help provide a realistic appraisal of your combined capital – and projected capital from the sale of your business – and determine your ability to meet the ongoing personal and financial needs of you and your family.

If the proceeds received after a projected sale (net of debt and taxes) cannot sustain your anticipated post-sale lifestyle, then it may be prudent to delay the transaction until a later time. Meanwhile, you can focus on increasing the value of the business over a period of years until its sale can satisfy your projected needs. Alternatively, you might identify ways to reduce your financial needs after the sale.

Questions for you and your wealth manager:

  • Am I prepared financially to exit the business?
  • Do I have adequate assets to provide for all my projected (and some unanticipated) needs?
  • What must I receive in a sale to attain the lifestyle I want?


Know Your “Walk-Away” Number

Through careful employment of these simple steps, you can identify a reasonable sale price that satisfies your future financial needs. Knowing this number is crucial before entering the marketplace. Without this knowledge, you may unintentionally create stress and an added financial burden on you and your family with a sale that does not accomplish family financial goals.

We have walked through this analysis with countless clients, helping them solidify their decision to sell. Most proceeded with the sale and now enjoy the post-sale lifestyle they projected. A few others wisely refrained from a sale that would have been premature and are working toward a sale in the near future.

Our experience can guide you and move you closer to a successful transaction. Please call us anytime at 404-719-4792 for clarification or for a deeper discussion of these key points.