Four often overlooked steps when selling your business

Selling a business requires thought and preparation. While it’s never too late to prepare, the more time you give yourself, the better your options will be. It typically takes more than a year to get a business ready for sale and to evaluate and implement the estate and wealth transfer planning strategies that will benefit you and your family the most.

The process can be emotionally charged and stressful. The stakes can be particularly high. The business interest often represents the largest asset on an owner’s balance sheet. The sale can be the largest, and most important, decision a business owner will ever make.

For any owner considering the sale of their business, it is important to evaluate the pros, cons and financial implications of all options. While every sale is unique and has different objectives, don’t overlook these four key planning steps to improve your chances of a successful sale.

1. Know your worth

Capital market conditions are an important factor in deciding when and how to sell a business. It is critical to have a good understanding of what your company could currently sell for and if it can weather a comprehensive due diligence process. You should take the perspective of “thinking like a buyer” in assessing the most critical factors that drive business success: strategic positioning, financial resources, leadership strength and operational efficiency. If done thoughtfully, this pre-sale window allows any existing operational or legal issues to be addressed prior to going to market. It also allows a realistic timeline to maximize the business value.

Overall, a lack of preparation (generally starting a year or more in advance) risks a transaction not being completed. Once a business is known to be for sale, employee retention can be put at risk and competitors can attempt to capitalize on any transition to their advantage. It’s critical that you know the company’s valuation and are committed to the sales process so you are prepared for any of these challenges as they arise.

2. Find the best deal (not just the first deal)

Most business owners field various offers from competitors or strategic buyers. It might be tempting to consider offers as they come. But you’ll want to avoid the trap of evaluating one offer at a time. This is repetitive, time consuming and generally doesn’t lead to a sale. Even if it does, the financial benefit may not result in the highest purchase price, which is something you would never really know.

Once you decide to sell your business, there are multiple reasons to engage a business broker to pursue a sale through a confidential and disciplined process. This puts the business owner at an advantage on matters of confidentiality, maintaining operational focus, having an extensive contact list and negotiating contract details. The importance of keeping company information confidential cannot be overstated. A business broker can control the distribution of confidential information only to qualified buyers. Plus, the broker may be able to keep the company name confidential in the early stages.

A business broker will generally have a broad network of contacts, which allows your proposal to reach more prospective buyers in a shorter time frame. By following a proposal process, you can receive offers from multiple buyers, reviewing the same information, all within a coordinated timeframe. This process should encourage potential buyers to lead with their best offer to avoid the risk of losing the deal.

Using a business broker adds an expense in the form of a commission or percentage of the sale price. But this is a cost of doing business and will put you in the strongest position to maximize the financial benefits from the transaction.

3. Evaluate short- and long-term cashflow needs

While a sale will bring liquidity, it may not all be received immediately, given that most transitions involve escrow arrangements, earnouts or seller financing. Buyers often also negotiate ownership in the acquiring company with the potential for future returns.

Many business owners are surprised to discover that their post-transaction personal expenditures significantly increase. Besides no longer receiving earnings from the company, owners often supplement their lifestyle (and often that of family members) through the company, such as providing a company car, club memberships, and engaging in significant travel for entertainment events to promote the business. These lifestyle benefits likely will be eliminated once the transaction closes.

Understanding your short- and longer-term cashflow needs is critical. Just as you know the cashflow and balance sheet of your business, understanding your personal cashflow expenditures and balance sheet – both on a pre- and post-sale basis – will help you manage cash needs. Engaging a wealth advisor to discuss a future portfolio allocation and anticipated yield will be an important aspect of your cashflow analysis.

Business owners are often surprised that the annual income generated from an investment portfolio may not meet their lifestyle needs, which have increased since the company no longer pays for various expenditures. The goal here is to not feel rushed from a cashflow planning perspective in the face of an impending deal. By understanding your short- and long-term cash needs and expenses, you’ll be more informed and better able to manage any possible future decline in cash flow.

4. Minimize income and estate taxes

Another priority when preparing for a sale is taking the time to manage taxes.

For income tax purposes, there are a range of strategies to limit capital gains taxes. If your company is a C Corporation, you should determine if your stock meets the requirements for Qualified Small Business Stock, allowing you to avoid up to $10 million of capital gain. Even after a sale, it is possible to make charitable gifts that can offset the capital gains from the sale if you do it in the same year.

When it comes to estate taxes, if your assets exceed $13.99 million in 2025 ($27.98 million for a married couple), you’ll be exposed to estate taxes at 40% on that excess and will want to think about gifting strategies. There are a variety of strategies that can maximize your gifting in advance of a sale. These often capitalize on valuation discounts that apply to gifts of partial interests in a company. If the value of your business is going up, gifting when the value is lower will allow you to pass more to your heirs over time.

A sale is also an important time to discuss your charitable gifting goals with your family. Business owners often will set aside funds for future charitable gifting through a transfer either before or after a sale. This can be done with either a donor advised fund or a private foundation, depending on your tax circumstances and charitable goals.