Your Plan to an Effective Business Sale

Three Years Before the Sale

Once you’ve decided on a timeframe for when you’d like to sell your business, it’s time to discuss your transition goals with your Baird Financial Advisor. Common goals often include:

• Maximizing the sale value of your business
• Minimizing your tax liability
• Determining how to sell the business
• Protecting the culture of your company

In a similar vein, your advisor will want to help you make sure you are personally and financially prepared for the sale – and that you’ve planned for this new chapter of life.

Within this three-year period before the sale of your business, you’ll also want to consider your personal post-transition plans. What will your retirement look like? Will you be taking on any new business ventures? Along with those considerations, you’ll also want to think about how your cash flow and liquidity needs will change. And when it comes to insurance, you’ll likely be able to cancel certain insurances for your business, like general liability insurance – but you also might want to invest in tail coverage to protect against any claims that arise after the transition occurs. Finally, if the sale of your business involved significant assets, you may want to start prioritizing personal insurance like umbrella liability insurance.

Additionally, it’s necessary to consider your pre- and post-sale tax, wealth transfer and charitable planning strategies. Your advisor can work with you to:

• Develop an efficient multi-year tax planning strategy for pre- and post- sale
• Transfer wealth to family members or others
• Discuss the implications of your newfound liquidity with your family
• Maximize the tax benefits of charitable giving

After you’ve discussed the necessary topics with your advisor, it’s time to tie it all together as you work to prepare your business for a sale. Key steps in this process include assessing the value of your business, analyzing your buyer pool and conducting a business tune-up.

One Year Before the Sale

After you’ve addressed your personal retirement plan, it’s time to focus on creating a seamless exit for your business that minimizes disruptions to day-to-day operations. Within this plan, you’ll likely want to include:

• A timeline with key milestones
• A business valuation
• A communication strategy for informing key stakeholders of the business transition

Selling your business is not something you should have to do alone – consider building out your very own transition team with your trusted advisors. Your Baird Financial Advisor can serve as the quarterback of this team, coordinating your attorneys, accountants and other advisors like Baird’s Business Owner Solutions and Wealth Planning teams (as appropriate) to ensure your plan is executed appropriately.

After your business transition roadmap has been created, the next step is to update your personal balance sheet and wealth plan. This helps determine your financial position independent of the business, along with evaluate how the proceeds of the business transition can fit into your personal wealth plan. To do this, take inventory of all your assets (including real estate, investments and savings accounts) and liabilities (including loans, mortgages and debts) with your advisor to discuss the most effective ways for you to organize your wealth plan post-transition.

After the Sale

At this point, you may feel like a weight has been lifted off your shoulders – your business has been sold, and you’re ready to begin this new stage of life. But don’t forget to tie up those loose ends to avoid potential consequences in the future.

The first step is to address any post-sale obligations. These could include the following:

• Providing financial disclosures to a buyer
• Evaluating company tax implications
• Following through on any post-sale commitments

By completing these tasks, you significantly lower the possibility of future disputes with a buyer and allow an opportunity to consider the impact any tax implications had on your new cash flow.

After the sale of your business is complete, it’s essential to revisit your balance sheet and wealth plan with your Baird Financial Advisor to ensure all your assets and liabilities are in alignment. Part of this review will also likely include the implementation of an investment strategy that uses the proceeds of the business sale. Since you and your advisor previously discussed what the best strategy could be for your situation before your business sold, you will be well positioned to act on your plans.