Three Ways to Maximize Family Wealth When Selling Your Business
You’ve dedicated years to building up your business, and it's thriving. You're confident that there are buyers willing to pay a premium for it, so you're considering selling. However, amidst the sales process, many business owners often overlook opportunities to maximize the wealth tied up in their company and secure the best possible outcome for themselves and their families.
When selling their companies, entrepreneurs frequently make three critical mistakes that can reduce the amount they receive after taxes. These mistakes typically revolve around a lack of pre-sale wealth planning, inadequate preparation of the company for sale, and a failure to negotiate skillfully.
One common error is neglecting pre-sale wealth planning. Often, entrepreneurs contact us when they are about to close the sale and suddenly realize the significant tax burden. Sometimes, we receive these calls after the sale has already been completed, leaving them with limited options to address their tax situation. However, with careful consideration and proactive measures, it is entirely possible to reduce or even eliminate the taxes owed, resulting in significantly greater wealth for both the entrepreneurs and their families.
If you're contemplating selling your company and wish to minimize capital gains or future estate taxes, taking action before the sale is usually necessary. For instance, if you have charitable inclinations, there are methods to reduce your capital gains tax liability. Similarly, if you intend to leave an inheritance to your children, certain trusts can preserve your company's value and transfer its future appreciation to your heirs instead of the government.
Another mistake is failing to prepare the company adequately for sale. For most entrepreneurs looking to sell, it's crucial to take steps that enhance the value of their businesses and make them more appealing to potential buyers. There are numerous actions business owners can take to achieve this.
Prior to selling, it is advisable to exercise tight control over discretionary spending and ensure that the business's financial statements accurately reflect its value. Additionally, conducting a formal and comprehensive valuation of the company and, if possible, restructuring assets to create greater corporate value are often prudent. The goal is to ensure that the company is operating at its best as soon as possible, thus maximizing its value.
Lastly, many business owners and their representatives fail to negotiate the sale skillfully. To construct effective negotiating strategies for ultra-wealthy entrepreneurs selling their businesses, we invest significant time in profiling and evaluating potential buyers. By deeply understanding their needs and desires, as well as having the same insights into our ultra-wealthy entrepreneur clients, we can secure excellent deals for our clients.
Unfortunately, too often, business owners and their representatives lack the finesse required in negotiating the sale of their companies. Pressures to close a deal sometimes lead to agreements that fall short of their true potential. When engaged in a sale, our aim is for all parties to reach an agreement where everyone is content. We believe business owners should be actively involved in the negotiating process and fully aware of the implications of each proposal.
For many entrepreneurs, selling their companies represents the most significant transaction they will ever undertake. Since there are very few serial entrepreneurs who have dealt with such situations before, it is crucial to assemble an exceptional team of professionals to avoid missed opportunities and extract the highest value for your company. In doing so, you can generate the greatest amount of family wealth.
