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Survival Guide: Selling Your Business

Updated: Aug 10, 2023

Why Sell your Business?

Thinking about passing your business on to your family? Considering selling in the near future? You may want to consider bumping up those plans sooner, as there are clear signs it might make sense to sell this year.

It’s been widely reported in the past few months that Biden’s White House plans to raise taxes on those individuals who make more than $1 million per year. As a part of his American Families Plan, the administration has proposed to nearly double the capital gains tax rate, increasing the incorporated businesses tax to 28% from 21%, as well as remove the tax benefit (or “step-up in basis”) for appreciated assets such as real estate and businesses. The combination of these would effectively create the historically high tax rates for business owners and high net individuals alike. An owner who has been considering passing their business on to family members or even selling in the next few years could have a potentially large tax rate looming, possibly more than 61%, according to an analysis from the Tax Foundation. That would be the highest taxes have been in almost a century.

The Tax Plan has growing support, and Americans from both sides of the aisle favor the idea of taxing wealthy individuals and corporations over a personal tax hike. A Fox News poll in April 2021 showed 56% of respondents favored increasing the tax rate on businesses and corporations as a way to pay for the White House’s infrastructure plans and national debt. A similar poll by the Washington Post showed 58% supported the tax hike.

What does that mean for you? With uncertainty of how these proposals will actually make it through Congress, maybe it’s time you consider what your 4 or 5-year plans for your business looks like under the filter of looming taxes. If you are a business owner who has thought about exiting your business in the next few years, you may want to think about ramping up your plans sooner.

Guide to Selling your Business

After spending years investing your time, money and energy into building a successful enterprise from the ground up, you can reap the benefits of all your hard work. In the best-case scenario, you can earn money to enjoy your retirement or next venture while leaving your business in the hands of someone who will look after your legacy. But, like most of life's rewarding moments, it can also be stressful. Many business owners go into a sale without thinking about what's ahead or knowing what to expect. Taking the time to prepare mentally can help you survive the sales process and get the best possible outcome.

Plan Ahead

Most experts agree that you should start planning the sale of your business one or two years before you actually sell. This gives you time to prepare the business, untangle personal and company finances and take advantage of favorable opportunities. Unfortunately, this isn't possible for all business owners, especially if you're selling due to illness or a dire family emergency, but try to give yourself as much lead time as possible to have a successful sale.

Prepare Mentally

Take some time to think about the process ahead of you. Do research concerning what's involved with selling a business, including preparation, marketing, finding a buyer, negotiating and the due diligence required before settlement. If you know what's ahead, you're less likely to be surprised, or disappointed, by the process.

Many business owners also have seller's remorse. After the business is gone, they're left wondering what's next. Make sure you have post-sale plans, whether that's a trip to Europe or a new business venture, so you know what your future holds.

Have Realistic Expectations

Managing expectations is one of the best ways for you to decrease stress during the sales process. This starts with an accurate valuation, so you have an idea of what offers you're likely to receive. Asking too much or too little can impact your chances of a quick sale and lead to the business sitting on the market and growing stale. Getting a professional valuation can give you a good idea of what your business is worth.

You should also be realistic about the time it takes to sell a business. The average time to sell in America is 6-11 months. You may be pleasantly surprised by quickly getting a great offer, but be prepared for the process to take some time.

Be Prepared

A lot of paperwork is required when selling a business and it's good to get this prepared early. Financial details are needed to write a memorandum of sale and advertising material. At the end of the process, buyers ask to see profit loss statements, tax returns, lease information and other contracts as part of due diligence. If you prepare all this before you put your business on the market, it can decrease stress during the journey.

Buyers also look for a business that's easy for them to run. A comprehensive book of procedures not only helps you see where there are holes in your business processes, it can also make your business more attractive to prospective buyers.

Hire Some Help

As a business owner, you're likely an expert in your field, but this doesn't make you an expert in preparing to sell your company. Even great salespeople can have difficulty taking full responsibility for a business sale because of all of the small facets involved. That's where companies such as ourselves come in to play - to help you get ready to sell your business.

Selling your business allows you to be rewarded for the time and hard work spent to make it grow. Preparing yourself mentally can help you survive the sales process so that you can enjoy the fruits of your labor. To schedule a no obligation, confidential meeting, contact Epic Consulting here.

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