Maximizing Profit: Financial Planning for Business Sale
After years of building your company, you’ve decided you’re selling your business. While the decision to sell wasn’t easy, you might find that getting ready for such a complex transaction takes the same kind of heavy lifting as when you launched.
However, you don’t have to do the work on your own this time. The business brokers at Sunbelt Business Brokers are steeped in experience and knowledge of buying and selling small and medium-sized businesses. We can guide you through the selling process to get your business from being listed to sold with an impressive profit.
Here’s an overview of what to consider in financial planning for selling your business.
Setting Financial Goals
Just like before you started your business, you must set goals for what you want to get out of selling it. These goals should include the desired price for the sale, the timeline for selling, your terms, and what you want to get out of the sale financially.
Setting your goals will give you clarity on the outcome you seek, guide your decisions during negotiations, prepare you for transitioning, and align the sale with your personal financial goals.
Improving Financial Performance
Potential buyers will be interested in the financial performance of your company. There are several steps you can take to demonstrate and improve the financial performance of your business:
- Financial Records: Organize and maintain financial records
- Minimize Debt: Pay off and reduce debts to improve net worth
- Increase Profitability: Identify areas to increase revenue, cut costs, and improve efficiency
- Improve Working Capital: Manage assets and liabilities to improve cash flow
- Financial Projections: Develop realistic projections for growth and profitability
- Tax Compliance: Keep the business in good standing with tax authorities
Improving your company’s financial performance will show buyers a stable and promising business, attract a higher price at closing, and lead to a done deal.
Business Value
The valuation process includes all aspects of your business: management, capital structure, potential future earnings, and assets. Boosting the financial performance of your company can go a long way toward increasing its estimated fair market value.
If you want a better idea of how much your business might sell for, you can start by evaluating the economic worth of your company with the free business valuation calculator from Sunbelt Business Brokers.
Tax Planning
Selling your business creates income, and that means taxes. How much you pay can depend on the structure of the sale and the type of company, among other matters. In most cases, the IRS views the sale of a business as selling off individual assets.
One important factor in tax planning is whether the assets being sold have been held for 12 months or longer. If so, the profits are treated as long-term capital gains, with a tax rate of 15%. Shorter holdings should be taxed at your individual tax rate, which could be as high as 37%.
Post-Sale Financial Planning
After pouring everything you had into your business, selling your business will change your life. While you’re planning to sell, you should also plan for life afterward, especially regarding financial matters.
What will be your investment strategy? How will you manage risk? Consider whether you need to update your estate and legacy planning, and then review any charitable giving activities. With this information, you can make a plan for what comes next.
Get Guidance From a Business Broker
Selling your business isn’t easy. At Sunbelt Business Brokers, we get business owners through the entire process, from the idea of selling to being sold. To start your financial planning for your business sale, get in touch with us today.
