How to Sell Your Business With No Regrets

An older businessman smiles as he shakes hands with another man at a conference room table.

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For business owners, selling their company represents the pinnacle of their entrepreneurial journey — someone wants what you’ve created and is willing to pay to acquire it. But realizing the full potential value of a business requires more than simply finding a buyer. It demands strategic preparation, careful planning and the guidance of experts, such as a Certified Exit Planning Advisor (CEPA^®). A CEPA is a financial professional trained to help business owners develop a custom-tailored exit strategy unique to their specific circumstances.

The Exit Planning Institute (EPI) developed the Value Acceleration Methodology, a framework for business owners to grow and protect the value of their business while planning for its transfer. The model integrates three components: value growth, value protection and value transfer. CEPA experts are trained to help clients maximize business value at every stage of ownership and exit planning.

If you are a business owner, conduct an annual valuation with your financial professional to track progress and identify areas of improvement. This proactive approach ensures you're always ready for a potential sale, whether planned or unexpected.

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Now, let’s explore core strategies that can help maximize the value of your business before you sell it and help you deal with life after the sale.

Boost your business' worth

A crucial first step in preparing your business for sale is enhancing its value. Prospective buyers look for strong financial performance, but they also want businesses that can run efficiently without the owner. We call this “decentralizing the owner” from the business. You want your business to be able to run smoothly with or without you.

Consider improving operations by hiring or partnering with top talent, implementing more streamlined technology or automating mundane processes. Diversifying top-performing revenue streams and focusing on what increases revenues will also hike up the value, as opposed to depending on a single source of revenue or wasting time and energy selling products that do not increase your business’ profitability.

You should also conduct an internal audit to identify inefficiencies. It’s important to be true to yourself and gain honest feedback from your team so that problems can be resolved efficiently. It is also imperative to evaluate company culture and see where leadership can step in to make the employees’ lives better. Happy employees tend to work harder, stay at companies longer and have more loyalty.

Minimize tax liabilities

Selling a business can come with significant tax implications, and minimizing tax liability is vital for retaining more of the sale proceeds. When structuring a sale, strategic tax planning is critical. It matters whether the company is an S corporation, a C corporation, LLC, partnership, etc. It matters whether it is an asset sale or a stock sale. It is also crucial to start thinking about tax strategies that can help reduce capital gains. There are many strategies, and they change from year to year, which is why it is important to work with an adviser who is staying up on the most viable ones available.

Begin tax planning early by consulting with a tax adviser three years before you intend to sell, if you are able to. They can help you explore opportunities like reducing taxable income through deferred compensation plans for key employees, which not only reduces current taxes but also incentivizes staff to stay on post-sale. They can also help make sure your entities are set up correctly to take advantage of the best strategies at the time.

Plan for succession and continuity

One of the biggest concerns for prospective buyers is whether the business will continue to thrive after the owner leaves. A robust succession plan, including the development of a strong management team, ensures that the business can continue smoothly without you. Buyers will place more value on a company with experienced, empowered leaders in place.

Identify potential successors early — whether from within the company or externally — and start grooming them for leadership roles. Formalize your succession planning in writing to show potential buyers that a clear path forward exists, regardless of your departure.

Time your parachute – when is it time to sell?

Timing can make or break the success of a business sale. It’s important to assess both market conditions and your own personal readiness. Waiting for the market to be in your favor makes sense, sure, but equally important is understanding your own personal financial, emotional and health needs.

Don’t wait for a personal crisis to decide when to leave your company. Instead, plan strategically by reviewing market trends. For example, if you notice industry consolidation or that demand for businesses like yours is high, you might aim to sell during that period to secure a better valuation.

Determine your post-exit strategy

After a successful sale, many business owners face the challenge of managing a new influx of wealth. Transitioning from business owner to retiree (or entrepreneur of a new venture) requires significant financial planning to ensure long-term security. Begin creating a post-exit financial plan as early as possible. This might involve diversifying the sale proceeds into investments that provide long-term growth and income.

Aside from dealing with what to do with the money after a sale, business owners also have to figure out what they are going to do with themselves. Don’t wait until after the sale to consider the answer to the question now what? Start thinking about whether you want to fully retire, invest in new ventures or focus on personal passions. When polled, 76% of business owners said they regretted selling their businesses within a year of their exits — which is why you want to make sure you are mentally and spiritually ready for life after sale.

The five D's: Avoiding a forced exit

Unexpected events — like death, disability, divorce, disagreement or distress — are the five main factors that can force business owners into an unplanned exit. Having contingency plans for these scenarios can protect your business and ensure you don’t leave value on the table during a rushed sale.

Have legal and financial protections in place to shield against the 5 D's. This includes knowing what the value of your business is, having the leadership team established, updating key person buy-sell agreements and building emergency reserves that allow the company to weather financial storms. Prepare for worst-case scenarios so you can exit the business on your preferred terms, not due to an emergency.

Making legacy matter

Many business owners assume their children or family will want to take over the company, but this is often not the case. Ensure you’re realistic about what your heirs want — whether or not they involve the business — for a more effective exit.

Have open, honest discussions with your family about their long-term ambitions and understand that they may prefer to inherit the proceeds of a sale to pursue their own dreams rather than continuing yours. Incorporate their feedback into your planning to structure a sale that benefits everyone.

The bottom line

Transitioning away from your business is one of the most important financial decisions you’ll ever make. By taking the right steps to enhance its value, plan for taxes, build continuity and time your exit appropriately, you can ensure your legacy and your financial future are secure.

Working with a CEPA^® can help you navigate this complex process, allowing you to leave your business in a stronger position than ever. And don’t forget, you will exit your business one day.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Nick Guida takes pride in creating a welcoming environment to help affluent individuals, families and foundations gain access to strategies and resources that are custom-built for their particular circumstances. The way Nick envisions the relationships with the people he serves is that they’re the CEO, and he and his firm are the supportive CFO bringing well-vetted resources and advanced tax planning strategies to the table. Nick has demonstrated his industry knowledge by writing articles published by Fortune.com, Money.com, Annuity 123 and Forbes.com.