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To Sell or Not to Sell – A note to all business owners

March 11, 2015

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We make a living from managing the tax and business aspects of transitioning businesses, but does that mean we always recommend that you sell? The answer is definitely not!

For the last 15 years, financial planners and M&A professionals have been predicting the great transition of baby-boomer-owned-businesses to new ownership. Considering this, owners should have been cashing in on their lifetime’s work in far greater numbers than they have. So, what happened?

fork in the road

There are several factors that might explain the lack of business transitions seen in this demographic:

  1. People are healthier than ever and enjoy what they are doing.
  2. The prospect of converting assets that generate cash flow into cash and/or risky investments is not appealing.
  3. They have become confident that there are lots of buyers and that they have the luxury to wait for the right time to sell.

A Planned Exit

  • Your spouse has stood by you as you worked late, listened to you fret about troubles at the office and was proud (and maybe a little surprised!) you became so successful. Maybe it is time to make a plan to personally invest in your family.
  • You’re not going to live forever. In fact, you can’t really count on your health after 70.
  • I completely agree that converting almost guaranteed cash flow into investments is nerve-racking; however, there are great advisors in the investment industry who will help develop a plan to meet your family’s and your needs.
  • If you wait until you absolutely have to sell your business, the timing and circumstances may not be right to maximize your payout. Potential purchasers are always able to sense the urgency to sell and will do everything they can to sway the price and terms in their favour.
  • A well thought out plan may allow you to work longer doing what you love, while almost guaranteeing your eventual payout.

Planning your business transition is an important process one we all know won’t be easy from both an emotional and strategic perspective. That being said, selling your business may not be the best option for you. I know lots of business owners who have made a decision to keep working and eventually close the business when they have had enough. This too can be a practical and beneficial strategy.

The best advice we can give you is to sit down and have an honest discussion with yourself, your family and your trusted advisors. You might be surprised where it leads you.

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