Exit and Growth Strategies for Middle Market Businesses

5 Ways to Maximize the Proceeds From the Sale of Your Business

By Brian Ballo | Mar 10, 2014

Money BlocksThis Blog Post is the first in a series of 5.

Naturally, business owners believe that their business can be sold at the higher end of the pricing range. However, an attractive Letter of Intent to Acquire typically does not come unsolicited. Therefore, to increase the odds of maximizing the proceeds from the methodical sale of your business, the following tactical steps can be taken:

1.  Discuss Your Goals, and Get a Reality Check, from Your Advisory Team

Assuming the timing is right for you to sell, the sale of business process starts when you communicate your desired post-business lifestyle to an advisory team composed of an Investment Banker, Wealth Advisor, Tax Attorney, and an Accountant. They will work backwards, to present and structure the sale opportunity accordingly.

The Investment Banker and Wealth Manager provide reality checks on whether the owner’s goals are achievable. To determine a realistic expected sale price, an Investment Banker will perform an informal valuation.  Information about “EBITDA multiples” from comparable sales in the company’s industry, paid by strategic vs. financial buyers, are used as a good rule of thumb. The Wealth Advisor enhances preliminary valuation information with a Wealth Management Plan, which estimates net proceeds, after tax, from the sale of the business, as well as how such proceeds can be invested to achieve retirement goals.

This planning process helps determine sale objectives such as whether: all or a majority interest will be sold; the transaction will be structured as a stock vs. asset sale; the key owners or other key employees will stay on; and, if the bulk of the proceeds will be paid in cash at closing, or if an earn-out is acceptable. A Tax Attorney will then develop and document trust and estate planning strategies, which should typically be formulated and implemented to some degree prior to a sale transaction being consummated.

Posted by Brian Ballo.

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