The Six Pros This Adviser Says You Need to Sell Your Business

Six businesspeople run side by side up a flight of steps outside a skyscraper.

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If you’ve been in business for a while, you know your competitors. It’s easy to think that your longtime rival in the next town over will gladly gobble you up as you sail into retirement. Simple, clean, lucrative. Unfortunately, things don’t often play out that way.

To sell a business, you must make sure that your books are clean. I’ve seen deals fall through in due diligence because of a few missing numbers. To sell and to stay retired you need a financial planner to help you create a plan to ensure that you realize enough from the sale.

Very few sellers know their buyer before they enter the bidding process.

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The deal structure is a negotiation, and the final result has a significant impact on the tax bill. And if you do all of that correctly, you may wind up with a taxable estate that requires complex legal planning.

The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.

Don’t worry. It will all be worth it. Here are the six band members you need to sell your business. Take one away and the music may not sound so sweet.

1. Accountant/bookkeeper

See the point above about a deal falling through in due diligence because of a few missing numbers. Some experts estimate that about half of deals fall through in due diligence.

It’s a complex process where a lot of things must go right, but not having clean, GAAP-compliant books will mean you likely won’t get far.

If you’re within five years of sale, you will want to make sure you have a controller or external accounting professional maintaining monthly financials.

2. Financial planner

As an owner considering a sale, you may think the time to hire someone to manage your financial life and your money is after you get the money. As a financial planner, I would say that you’ll be much better served getting someone like me on board beforehand.

The first thing a good CFP® professional can help you figure out is your wealth gap. I wrote an entire article on this topic, Business Owners: How to Calculate Your Wealth Gap in Five Minutes, but in short, it’s the amount of money you need to net from the sale of your business to maintain your lifestyle in retirement.

A big part of our value during the sales process, and in general, is coordinating the other professionals. For our clients, we are introducing all the parties on this list to ensure that we are checking all the boxes and getting the most out of the sale.

Lastly, the financial planner is the person who is going to put the money to work beyond sales in accordance with your financial plan. That is the roadmap to try to ensure you don’t run out of money. If you want to try a free version of the software we use, you can access it online.

3. Business broker/M&A adviser/investment bank

People often use these terms interchangeably, but there is a general acceptance that the fancier the term, the bigger the deal size.

Regardless of what you call them, their job may be the most important one during this period. You are relying on them to package your business into the shiniest pitch deck possible and deliver it to the best possible or biggest pool of buyers.

Imagine if you had a very valuable and complex piece of real estate that makes sense for a specific pool of buyers. You care what the buyer will do after they buy the property.

Think of the M&A adviser as your real estate agent in the transaction. For the purposes of this article, we are speaking about small to midsize businesses with earnings before interest, taxes, depreciation and amortization (EBITDA) between $1 million and $20 million that are not relying on an investment bank to take them public.

There are two general approaches here: Go niche with someone who specializes in your industry or go wide with someone who has the biggest megaphone. Niches can apply to industry or EBITDA size.

The idea behind going with a specialist is that it’s not their first knee surgery. They know which arteries to avoid so that you get over the finish line.

If you are looking for someone with a big megaphone, it’s generally because you don’t know who the buyer is, and you want to broadcast to the biggest audience possible.

4. Strategic tax adviser

This is the one that is skipped the most often, probably because the seller assumes that the accountant will play this role.

But in our firm, these are two different departments. The tax team does your tax return. The strategic tax folks actually advise on deal structure to make sure your tax bill is as low as possible.

This person needs to be engaged as the deal is being negotiated, not when you’re filing your return the following year.

5. Business attorney

I have bought into and subsequently sold my shares of a private business, which was then bought by a third party. There were a lot of attorneys. They were all expensive. And, fortunately, I would say they were all worth it.

They will review the contracts to make sure, first, that you understand what you’re signing, but also where there may be liability. Even with two amicable parties, there will be red lines.

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6. Estate attorney

In the past 15 years I have seen the estate exemption float between $3.5 million and a complete repeal (in 2010) and the almost $14 million where it sits today. For a married couple, it is twice that number.

For that reason, taxable estates have become incredibly rare. However, a business sale is one of the most common reasons folks cross that threshold.

If you are navigating a significant sale, the time to tie in an estate attorney (and the financial planner) is before the deal closes. They can work with the strategic tax folks in considering whether certain trusts should be incorporated into the deal’s structure.

No one wakes up in the morning with a desire to hire another financial professional, let alone six. But if those pros are doing their jobs, you are paying relatively small dollars to protect big ones.

You’re probably going to get only one shot at this, so consider engaging a team that has had many shots at it.

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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After graduating from the University of Delaware and Georgetown University, I pursued a career in financial planning. At age 26, I earned my CERTIFIED FINANCIAL PLANNER™ certification. I also hold the IRS Enrolled Agent license, which allows for a unique approach to planning that can be beneficial to retirees and those selling their businesses, who are eager to minimize lifetime taxes and maximize income.