Very often, when owners decide that it is time to sell their business they have a perceived idea as to what the business is worth (or what is needed to meet their financial needs going forward). Unfortunately, however, the real worth of a business is seldom the same as the owners’ perception.
Before making a decision to market your company for sale, you should have an evaluation of its worth in the marketplace done by people who are knowledgeable and can determine a value range. Your outside accountant may not be this person, since he or she is not typically in the business of buying or selling companies.
After you have had an expert determine your company’s value, you should then have discussions with your outside accountant about the tax implications of a sale so you can get a sense of how much you would receive after taxes. Also include your outside valuation advisor in these discussions to help you structure a deal that would be beneficial to you as the seller and have no significant negative impact on the buyer.
Forewarned is forearmed: It is highly unlikely that the money received on the sale of your business will afford you the same lifestyle you are presently enjoying while you are running it. But you will be transferring business risk to the buyer and accepting a more stable investment environment going forward. Hopefully, over time, you will have made outside investments that will help offset any shortfall.