H2R CPA Blog
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by H2R CPA
For some business owners, succession planning is a complex and delicate matter involving family members and a long, gradual transition out of the company. Others simply sell the business and move on. There are many variations in between, of course, but if you’re leaning toward a business sale, here are seven ways to prepare:
1. Develop or renew your business plan. Identify the challenges and opportunities of your company and explain how and why it’s ready for a sale. Address what distinguishes your business from the competition, and include a viable strategy that speaks to sustainable growth.
2. Ensure you have a solid management team. You should have a management team in place that’s, essentially, a redundancy of you. Your leaders should have the vision and know-how to keep the company moving forward without disruption during and after a sale.
3. Upgrade your technology. Buyers will look much more favorably on a business with up-to-date, reliable and cost-effective IT systems. This may mean investing in upgrades that make your company a “plug and play” proposition for a new owner.
4. Estimate the true value of your business. Obtaining a realistic, carefully calculated business valuation will lessen the likelihood that you’ll leave money on the table. A professional valuator can calculate a defensible, marketable value estimate.
5. Optimize balance sheet structure. Value can be added by removing non-operating assets that aren’t part of normal operations, minimizing inventory levels, and evaluating the condition of capital equipment and debt-financing levels.
6. Minimize tax liability. Seek tax advice early in the sale process — before you make any major changes or investments. Recent tax law changes may significantly affect a business owner’s tax position.
7. Assemble all applicable paperwork. Gather and update all account statements and agreements such as contracts, leases, insurance policies, customer/supplier lists and tax filings. Prospective buyers will request these documents as part of their due diligence.
Succession planning should play a role in every business owner’s long-term goals. Selling the business may be the simplest option, though there are many other ways to transition ownership.
Contact H2R CPA at 412-391-2920 or firstname.lastname@example.org for more information related to selling your business, including succession planning, business valuation, tax planning or due diligence. Our team would be pleased to provide a complimentary consultation.
by Leo A. Hannah, CPA, MBA
Succession planning is a critical endeavor for all family businesses. If not done properly, a leadership void and/or discord among family members can have a significant negative impact on company performance. Although it is a difficult subject, it is critical to adequately prepare for succession. Key considerations include:
In the end, the goal is for multiple generations to talk openly, get everyone on the same page, keep the family together and continue a successful business. Contact H2R CPA at 412-391-2920 or email@example.com to learn more about how we work with our clients on succession planning.
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