Business Monday

Selling your business can help you achieve your financial goals

Selling a successful business can provide the financial capital to fund your retirement. It could also serve as the foundation for a new entrepreneurial venture or an inheritance for your children and grandchildren In any case, it’s important to think about your personal goals, as well as your current financial condition, and come up with an appropriate strategy before putting your business on the market.

A good first step is to analyze your personal savings and investments as well as any debts or loans, such as a mortgage. If you have accumulated a healthy portfolio of diversified assets, such as stocks and bonds, then you may not need to get the highest possible price for your business to enjoy a comfortable income in retirement. A financial advisor can help you review your assets and liabilities, and their future income-producing potential.

Next, you should think about how you want to spend your time after selling your business. Do you want to walk away from the company completely, or do you still want to be involved on a full- or part-time basis? Many owners would be happy to continue working for a few years as a consultant or business development representative without having the 24/7 responsibilities that come with ownership. Health is another factor to consider. If you or someone in your family is facing a serious medical problem, you may want to sell the business more quickly, so you can turn your attention to that issue.

Once you have done your self-assessment, you can turn your attention to the marketplace and start looking for a buyer. If you share ownership with one or more partners, they may be willing to buy your stake in the company, simplifying the exit process. If you have a son, daughter or other relative working in the business, you might focus on preparing that family member to take over as owner.

Other possibilities include selling the business to a private equity firm, an individual investor, one of your competitors, or your management team and employees. If you have a large, growing company, it’s possible you could attract the interest of Wall Street and capitalize in your hard work through an initial public offering (IPO).

If you are unable to find a buyer on your own, you may want to engage a business broker who can help put the transaction together for a percentage of the sales price. You will need to show your company’s financial records to any prospects, so be sure the balance sheet, income statement and receivables and payables accounts are accurate and up to date.

Once you find an interested buyer, you can start negotiating the terms of the sale. Here’s where your self-assessment can pay big dividends. For example, you might want to get the highest price for the business, regardless of how long it takes, so you can retire in style. Or you might prefer to sell to your employees, even at a lower price, in order to keep the business running smoothly on its current course.

Another issue to consider is how to structure your sales proceeds. You might want to receive a lump sum payment that could be added to your investment portfolio or be used to fund a new venture.

On the other hand, you might be satisfied with a series of smaller payments over the next few months or years if you don’t need the money right away. This might also be the only option if your buyer has limited funds.

Regardless of the situation, you should engage a business attorney at an early stage to advise you on the process, protect your interests and prepare the sales documents.

For example, the buyer might want to include a covenant that would prevent you from starting a competitive business for a certain time period. That’s not a big deal if you’re planning to retire, but could pose a problem with a new business.

Once the sale is completed, you can start to enjoy the rewards of all your hard work. Your financial advisor can help you decide how to incorporate your new wealth into your portfolio, as you move on to the next stage of your life.

Andrew Menachem, CIMA®, is a wealth advisor at The Menachem Group at Morgan Stanley in Aventura. Views expressed are those of the author, not necessarily Morgan Stanley, and are not a solicitation to buy or sell any security. The strategies and/or investments referenced may not be suitable for all investors. Follow

Menachem on Twitter @AMenachemMS

Other recent columns by Andrew Menachem:

▪ What Hurricane Irma can teach us about financial planning

▪ If you’re over 50, it’s time to get serious about retirement planning

▪ Take an active approach to investing in retirement

▪ Consider taxes in your investment decisions

▪ How to talk to your aging parents about money

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