Selling your business is likely one of the most important financial transactions you’ll ever make. The following ten steps can help assess your business’s value, reduce taxes, and prepare your personal finances for life after the sale.
1. Define Your Exit Goals and Timeline
Start by answering some key questions:
- When do you want to sell?
- What will you do next?
- How much money will you need to support your post-sale lifestyle?
Ideally, give yourself at least 2–5 years to prepare for a strategic exit.
2. Assemble Your Professional Team
You’ll need a team of advisors to help navigate the legal, financial, and emotional complexity:
- Financial Advisor: Helps model your post-sale income, investment strategy, and tax planning.
- CPA: Advises on how to reduce or defer taxes before and during the sale.
- Business Attorney: Drafts and reviews the sales agreement, NDA, and other legal documentation.
- M&A Advisor / Business Broker / Investment Banker: Markets your business, negotiates with buyers, and helps with the sale price.
3. Get a Business Valuation
A formal valuation provides a baseline and helps identify ways to:
- Increase profitability
- Reduce risk and dependency on the owner
- Improve documentation and financial reporting
It also prepares you for realistic negotiations and helps avoid leaving money on the table.
4. Clean Up Your Financials
Buyers want clear, organized, and verifiable financial statements. Ensure your books are:
- Accrual-based (if appropriate)
- Consistent across several years
- Free of personal expenses or non-essential add-backs
Having clean books can improve credibility and speed up due diligence.
5. Reduce Owner Dependency
If you are heavily involved in daily operations, it can lower your business’s value. Begin delegating key responsibilities and building systems that allow the company to run without you.
Consider:
- Hiring or promoting a general manager
- Documenting processes and procedures
- Creating customer and vendor continuity plans
This transition period can take time, but it can make a big difference in your sale price and terms.
6. Choose the Sale Structure
The way you structure the sale can affect taxes, risk exposure, and payment terms.
Common structures include:
- Asset Sale: Buyer purchases individual assets; often preferred by buyers for tax reasons.
- Stock Sale: Buyer purchases ownership shares; often preferred by sellers for simplicity and tax treatment.
- Installment Sale or Earnout: Payments are made over time or tied to future performance.
Collaborate with your financial and legal team to choose the structure for your needs.
7. Mitigate Taxes with Strategic Planning
Many owners are surprised by how much taxes reduce their net proceeds. But with early planning, you can often reduce your tax bill. Consider:
- Installment Sales: Spreads the tax burden over several years.
- Charitable Remainder Trusts (CRTs): Allows you to donate assets before the sale, while receiving income for a specified period of years or your lifetime and get a tax deduction.
- Qualified Small Business Stock (QSBS): Section 1202 may allow you to exclude capital gains if you meet specific criteria.
- Opportunity Zones or Deferred Capital Gains Strategies
Work with a tax advisor who specializes in business sales to identify which options apply to you.
8. Rebuild Your Personal Financial Plan
Once you have an estimated sale value (after taxes), you can begin shifting your focus from growing the business to growing your personal wealth.
Key considerations:
- Retirement income planning
- Diversified investment strategy
- Risk mitigation and asset protection
- Health care, insurance, and estate planning
A robust personal financial plan can help ensure your sale proceeds support your long-term goals.
9. Prepare for Due Diligence
Serious buyers will conduct a deep dive into your business operations, financials, contracts, and legal records. Be ready with:
- 3–5 years of financial statements
- Tax returns
- Customer and vendor contracts
- Lease agreements
- IP ownership documentation
10. Prepare Emotionally for Life After the Sale
Many business owners underestimate the emotional impact of selling. This business may have been your identity for decades. Once it’s gone, what comes next?
Prepare for:
- The identity shift from business owner to something new
- New structures of purpose, time, and legacy
- A potential lack of adrenaline or daily decisions
Final Thoughts
Selling your business is more than a transaction. With guidance and preparation, it can be a transformative financial and personal success.
If you’re planning to sell in the next few years, let’s start building your exit plan now. As financial advisors, we help business owners protect their legacy, reduce taxes, and plan for life after the sale.
Ready to learn more? Get started by
requesting a complimentary initial consultation whenever it’s convenient for you.
Read more articles by Ryan Johnson