When you started your own business, you probably didn’t give much consideration to selling it. However, with statistics showing that 80% of a small business owner’s net worth is tied up in their company, you should always keep in mind what it would take to reap a profit if you ever decided to cash in.
Whether you plan to sell your business outright or transfer to partners or family members, here are some steps you should take to protect your assets:
Know what your business is worth.
Getting a professional valuation of your business is key to a profitable sale. Be sure that whoever values your business has expertise valuing businesses in your industry.
Build your business as an investment.
The eventual buyer for your business is looking for a good investment, one that will continue to pay long after you are gone. Build your business as an investment by having a diversified management team that has some skin in the game, so they will stay on after the sale. Having a business that provides recurring revenue is also more attractive to buyers, so be sure your growth strategies are built on a solid foundation.
Have written plans and processes.
If your business plan exists only in your head, this is a big danger sign to potential buyers. Be sure your plans and processes are well documented so that new ownership can step in and run the business seamlessly.
Take taxes into consideration.
When determining the best time to sell your business, take taxes into consideration. Funding a retirement plan for employees and other tax saving strategies should be employed to shelter assets from taxation. As always, we recommend exploring your options with a tax and financial professionals.
If you’re wondering whether your business could be sold for a profit, or even if you’re worried about the legal health of your business, Forrest Law Center can help ensure your business is on the right track. We offer a LIFT (Legal, Insurance, Financial, and Tax) audit to existing businesses and LIFT planning to new businesses.
Disclaimer: This article is for informational purposes only and not intended as legal advice or to create an attorney-client relationship. Every situation is unique and consultation with an attorney is required before any specific advice can be given.