Here's a scenario that is all too common...

"I’ve owned a manufacturing business for 20 years, and now that I’m 68 and my kids are off doing other things, I’m thinking of selling. What are the three most important things I should be thinking about?"

While each situation is different, I can summarize the three things that apply to nearly every owner.

Perhaps most importantly, you need to recognize the tremendous impact this transition will have on you, your loved ones and your company’s stakeholders (employees, vendors, customers). This is a very complex change and focusing solely on the quantitative aspects can have disastrous long-term effects. I heed the advice of the wise philosopher of family, James E. Hughes, Jr., of three parts qualitative to one part quantitative as you begin taking this journey. It is with this in mind that I advise you.

#1 - Find Wise Counsel

First, you will need to work with someone to counsel you on the management of these simultaneous changes. They may come in the form of an exit planner, attorney, CPA, financial planner or investment banker. Their technical expertise is not as important as your ability to relate to them and receive advice in the qualitative aspects. If you don’t already have such an advisor as part of your team, ask for referrals. There is a field that identifies itself (as I do) as "exit planners" and they tend to be dedicated to helping owners maximize their transition in both a monetary and mental outcome.


#2 - Know Your Number

Second, you need to know how much money you’ll need to achieve financial security. That requires you to know how much you have (most people have a good handle on this), how much you intend to spend in retirement (this requires a little work), and some projections for what your asset allocation (i.e. stocks vs. bonds) and location (i.e. IRA, annuity, etc.) needs to be to meet your needs. Most exit planners and financial planners are equipped to help owners answer these questions.



A big part of your financial picture is likely the value of your company, so you should have a clear understanding of what your business is worth now and what that would net to you after taxes in a transaction. This requires the efforts of an exit planner, CPA, valuation expert, and/or investment banker/business broker. It’s really important to get an understanding of the types of buyers that might be interested in your company and the common deal structures that they may offer. Two significant issues are whether or not you will let the buyer pay you some portion of the purchase price over time (i.e. a "seller’s note") and if the deal will be a stock or asset deal (which greatly impacts taxes).



Once you accomplish these steps, if you find that the likely value you will receive puts you in a position to make gifts of some portion of the stock in your company to your children, charities, employees, etc., there are tax-advantaged means to do this before a transaction and you should consult with your advisors. If you find that the value is insufficient to support your lifestyle, then you face a challenge. You must either increase the value of your company or reduce your lifestyle expectations, or both.

#3 - Plan for Life After Sale

The third thing I recommend is having a plan for how you will spend time that is more exciting and rewarding than the way in which you live today. I have a process I use called an "ideal week," "ideal month" and "ideal year" where owners map out what would be best for them. Free time quickly becomes depressing, so planning ahead to make sure your calendar is full with rejuvenating activities is required. By creating a map for what would be ideal, many realize that "ideal" actually includes substantial work (for pay or volunteer) as a means to continue to create value for others.



If you do just the three things I’ve outlined here, you will likely overcome the unfortunate statistic that 75% of owners regret selling their companies. Best of luck with this transition.