Steer Clear of These Mistakes When Preparing to Sell a California Business

8:06 pm Business Planning

business for sale e1336161946930 Steer Clear of These Mistakes When Preparing to Sell a California BusinessA Wall Street Journal article last weekend noted that the wealth of many baby boomers is tied up in businesses they own, and this could become a problem when it’s time for retirement unless they do some advance planning to smooth the transition.  The article listed six of the most common mistakes that business owners make when selling the business and how to avoid them:

Mistake #1: Creating a business that is too dependent on the owner.  A business that is largely dependent upon its owner for its success is likely to make potential buyers nervous.  Delegate responsibility well before selling the business to ensure a smooth transition.

Mistake #2: Ignoring the tax benefits of planning ahead.  If you anticipate transferring ownership within five years, do it sooner at a lower valuation to avoid larger gift taxes.

Mistake #3: Incorrectly valuing the business.  Get a realistic appraisal of the business well before retirement ; if selling the business won’t result in the returns you need for retirement, then adjust your plans or come up with a strategy to increase your income.

Mistake #4: Rushing to accept a rich offer.  Don’t become fixated on the best offer since large numbers are sometimes used as a distraction.  Consider all aspects of the transaction, including how employees will be treated and how the buyer will finance the purchase.

Mistake #5: Hiring a relative to do the deal.  Interview five or six law firms early in the process and ask questions about how the deal would be structured, how the attorneys can help with negotiations, the length of time to close and structuring compensation packages for family members who want to stay involved in the business.

Mistake #6: Underestimating the emotional impact of selling a business.  Plan your post-exit lifestyle before you sell; if you want to stay involved, consider consulting work or a scaled-down schedule that will allow you sufficient time to transition into retirement.

Your California legal and financial planning experts are at your service; Contact us today.

Leave a Comment

Your comment

You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Please note: Comment moderation is enabled and may delay your comment. There is no need to resubmit your comment.