This is part one of a three part series on how wealth managers can help you before, during and after the sale of a business.
Planning for the sale: Start early for best results
Preparing for a sale should optimally begin several years before the desired exit date to ensure that all of the many pre-sale tasks and options are explored and addressed.
Underestimating the prep time can add stress to an already pressure-filled period and can also exact a financial cost. Several surveys of business owners post-sale have found that many regret not starting their planning sooner.
Some key elements of preplanning:
Determine what you need from a sale: It’s critical to know how much you need from a sale to support your lifestyle and that of any family members economically dependent on the business. Figuring out this number will also help you assess an offer’s structure in terms of upfront cash in full versus a price that includes contingencies.
Talk it through to create harmony: The sale of a business can have an impact on family members, possibly across multiple generations. Expectations regarding the sale process and the post-sale realities must be clearly understood by everyone with a financial stake, current or future, in the business.
Take action for tax efficiency: Changing a corporate structure, redistributing equity or creating a trust are among the moves you can make – often only before a sale – to significantly save on taxes. Beyond tax planning, consider developing an estate plan that aligns with your wishes for transferring wealth to heirs and philanthropies.
Altair in Action
Evaluating a Surprise Offer
“A professional contact introduced us to the owner of a growing, multi-generational business who had received an unsolicited offer for the enterprise. The price was attractive enough to be worth considering, but because the owner had not been planning to sell, he had not done any upfront thinking before the offer was on the table.
“His primary concern was his family’s financial future. They relied on the business for their livelihood, so would investing the sale proceeds produce enough income to replace what they were losing?
“To help in his decision making, we ran multiple financial scenarios that considered a range of return assumptions, income requirements, life expectancy and other variables. This gave him confidence that the proceeds from the offer would generate enough income to support both his lifestyle needs along with those of other family dependents. It also put him in a position to make a data-informed decision on both the offer size and structure requirements.
“This introduction and analysis were the starting point for this business owner and his family becoming clients of Altair.” – Bryan Malis, Managing Director
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The material shown is for informational purposes only and should not be construed as accounting, legal, or tax advice. Although we made efforts to verify the accuracy of the information, Altair Advisers cannot guarantee its accuracy. Please see Altair Advisers’ Form ADV Part 2A and Form CRS at https://altairadvisers.com/disclosures/ for additional information about Altair Advisers’ business practices and conflicts identified.