Jay Sachetti joined Jeff O’Brien, partner at Husch Blackwell and Dyanne Ross-Hanson, president of Exit Planning Strategies talked about the market for mergers and acquisitions, exit planning opportunities for companies that don’t end up for sale and how companies can maximize their eventual sale price during an early October panel at the first Upsize on Tap event at Summit Brewing Co. in St. Paul.
When the state Legislature passed a law requiring employers to provide paid leave and safe time for employees, Justin Bieganek started hearing differing details from friends, colleagues and peers.
Or you may be looking for an opportunity to make a change, shake up the routine and begin the next chapter of your life. It could be a spur-of-the-moment decision that you would consider if or when the right opportunity is presented.
Regardless of the circumstances, it is important to plan for a potential sale now – before the opportunities arise and decisions are made – because the way you manage this life transition could make or break your future success.
The sale of a business often triggers a host of strong and often conflicting emotions, especially for owners who have many years or decades invested in their company. Those feelings can run the gamut from hope and despair, confidence and uncertainty, excitement and dread and acceptance and fear.
The dictionary defines ‘transition’ as a passage from one form, state, stage, subject or place to another.
Many times, internal conflict arises when owners realize they’re moving into the next phase of their lives, or from the known to the unknown. Additionally, they haven’t fully assumed the new lifestyle, so they have the time to reflect on the changes ahead. This place in the middle is called transition.
The transition phase can have a profound effect on company operations and employee morale, and there are a number of questions that must be addressed in order to complete a successful sale.
Who will own the company, and what percentages will they control? How will your departure affect the culture of the organization? Will the new leadership value the company employees and have success working with them, or will your ‘human capital’ leave the organization? Will other assets such as technology, real estate and so on, be part of the transaction? All of these questions, and many others, will have a direct impact on the terms of your sale.
While dealing with these important factors on the company side, however, you must not neglect your own personal finances and life goals, interests and passions. In most cases, these entities are separate, yet they are directly related to one another.
Several years after your sale, you will measure its success in terms of how well you were able to move into your new life and pursue other passions and new endeavors. As a result, the transition needs to be managed and decisions made under a broad set of criteria that give proper weight to your goals and interests.
If you are contemplating a business sale, taking these steps now will help to lessen transitional impact on your life and maximize your personal success during and after the sale.
During important, life-changing moments like a sale of a business, large amounts of money can be lost if you don’t have the proper knowledge or receive sound, objective counsel to guide your decisions.
Find a team of advisers that you trust and will help you achieve your financial and personal goals, then tap their expertise to make sure you have a solid plan in place to maximize the amount you earn from the sale and your ability to pursue future endeavors.
Valuing a business can be a challenging task. Not only do you have to consider the value of your assets, but also you have to acknowledge the part of your brain that says, “I need to obtain enough money from the sale to finance the rest of my life, but how much is enough?”
It is essential that your advisers provide you with an analysis detailing the future financial needs of your family and that you are comfortable with this number. Your evaluation of an offer to buy your business shouldn?’t be clouded by uncertainty over this important aspect.
If the sale of your business involves a substantial liquidity event, proper planning for generational wealth transfer is critical.
Once a comprehensive investment plan has been implemented, careful consideration must be given to the amount of money that will be transferred to children and grandchildren as well as when to give it and under what circumstances.
The ‘how much’ question is one we ask more often as parents realize that too much money too soon can keep younger children from developing a positive self-esteem and an entrepreneurial spirit. On the other hand, waiting to transfer wealth at a parent’s death can deprive family members from realizing their full potential due to financial pressures.
When considering wealth transfer, it is also important to create a gifting strategy that includes other people and organizations that are important to you. Along with the necessity of a solid estate plan, this may mean the formation of a family foundation or the participation in donor-advised funds. Family involvement in charitable decisions can be an important way to transfer wealth as well as transferring your values to future generations.
It is critical to assess the quantitative aspects of your business during the sale to ensure a successful transition and maximize the return of all your hard work. But the qualitative side of the transition is equally important.
It deserves thoughtful planning to ensure that your new life is fulfilling, meaningful, and that it provides you with the emotional fuel once provided by your business.
