Even if you’re not completely sure when you want to sell your business, exiting business ownership can be a long process, and it is never too early to start planning ahead. In order to sell or transition your business successfully, take a look at an exit planning strategy with the help of an appraisal service in Maryland.
10 years away
In order to maximize profits and opportunities upon selling a business, owners should start planning at least 10 years in advance. This is especially true in cases where the business will not be sold outright, but will instead be passed on to a successor. Not only will the successor need ample time to learn the ins and outs of the business in order to maintain success, but the owner will also need time to make sure that they are able to generate additional sources of income, since there typically isn’t much liquidity when passing the business on.
Five years away
There are multiple exit planning strategies that are available, and the option you choose will determine your income structure. One such option is the nonqualified deferred compensation plan, in which an owner sells a portion of their shares to the company, and receives the rest of the total in deferred compensation payments. It is important to establish this plan as early as possible, because the plan will have to be in place for a sufficient amount of time while the owner is still on the company payroll.
Another option is a defined benefit pension program. Payments that are made into this program are used to provide an owner with a tax-deductible income option upon retirement. If an owner plans on making a “lifestyle” exit from their company, the five-year mark would be the time to shift the focus to maximizing cash flow as opposed to company growth.
Three years away
In the same way that you would make improvements on a house that you were getting ready to put on the market, the same must be done for a business that will be sold as well. The three-year mark is a good time to start making upgrades to your business assets to improve their appeal, such as adding a fresh layer of paint or updating the computer system.
One year away
This is the time when the action really picks up, as the end comes into complete focus. You will need a business broker to shop your company on the market, sift through all of the sales agreements and regulatory issues before the sale is completed. If you are considering selling your company to the employees as an ESOP sale, it will take at least a year to complete and file the sales documents, so this would be a good time to start that process as well.
One of the most important steps you can take as you prepare to sell or transfer your company is having a commercial appraisal done for your business. Here at Jane Campbell-Chambliss & Associates, LLC, we understand that every business owner’s situation is different, which is why we are here to offer you specific, individualized appraisal service in Maryland. Give us a call so you can start planning your future today.