Someday, most successful black business owners will do one of two things: sell the business or transfer ownership to family members.
At any given time, 40 percent of U.S. businesses face the transfer-of-ownership issue, according to the Small Business Administration. Owners who plan ahead may have a better chance of getting a fair price for the business, managing taxes, and giving the buyer a solid value. Sellers are advised to speak with a tax consultant before any sale of a firm.
Whether you just opened your doors or are planning to leave soon, it’s a good idea to plan your exit now. When it comes time to sell or transfer the business, some critical issues need to be addressed.How are you investing in the business?Are you reinvesting every dollar back into the business, or spending it? Both extremes should be avoided to maximize your negotiating position and help reduce exposure to taxes in a transfer or sale.
For example, if you never accumulate assets outside the business, you might sacrifice your bargaining power because you will be entirely dependent on the selling price for retirement income. Or, if you plan to transfer the company to family members, investing too much could increase taxes and transfer costs.
One of the most important selling points of any business is the income stream. However, many owners make purchasing and investment decisions based on keeping income low for tax purposes. By keeping a record of such expenditures, you can show normalized profits for your business.Is the business valuable without you?In many small businesses, the owner is the most valuable asset. Have you asked yourself what the business might be like without you? Can you train a suitable replacement, or will you need to stay on after the sale, and for how long? What is the incentive for you to stay?
Some aspects of selling a business are immutable. It’s your decision whether to ignore them until the end or plan in advance in order to benefit later.