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What are the tax implications of selling a business?

Tax implications of selling your business
Planning for the tax implications of selling your business is an essential part of maximizing your financial outcome. Many business owners underestimate the tax impact which can lead to unexpected financial strain.  In this article, you will learn about some of the top tax considerations involved in selling a business, highlighting the importance of structuring the deal optimally to reduce tax liabilities. This content is meant to illuminate the importance of strategic tax planning, but should not be considered tax advice. Depending on the specifics of your business and the deal other tax implications may apply than what is covered here.  You will want to ensure you get personalized tax advice from a qualified tax professional, a key member to have on your expert team. How the sale of a business is taxed Capital Gains vs. Ordinary Income A business sale is taxed at ordinary income rates or capital gains…
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How to Find a Buyer for Your Business

How to find a buyer for your business
Selling your business is a significant milestone in an entrepreneur’s journey. For many entrepreneurs, finding the right buyer is the capstone of their hard work and reflective of their dedication to pre-sale planning. Whether you’re planning to retire, start a new venture, or simply want to hand over the reins to someone else, understanding how to find the right buyer when you’re ready to sell your business is critical.  It’s tempting to latch onto the first interested party, but patience and due diligence can pay off. This blog post will guide you through the process of identifying and securing the right buyer for your business. Cast a Wide Net for Buyers  To attract the right kind of buyer you will want to cast a wide net.  By reaching out to a range of sources, you’ll open up more opportunities for finding the best fit buyer. Consider these options:  1. Engage…
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Your Guide To The Letter of Intent (LOI) – An Essential Document for Selling Your Business

Two men talking about writing a letter of intent
What’s a Letter of Intent (LOI) To Sell  Selling your business starts to feel real with the introduction of a critical–yet misunderstood– document: the Letter of Intent (LOI) to Sell. This document, while not usually a final agreement, sets the tone for what is to come, acting as the "rules of engagement" in the negotiation process. Just as a marriage proposal signifies a commitment to a shared future, an LOI marks the start of a delicate dance between buyer and seller, where strategy, foresight, and negotiation play key roles. As the seller, you will want to ensure you’ve completed your Deal Book prior to signing an LOI, anchoring the valuation benchmark as high as possible. This initial reference point in the LOI will be the number against which the buyer negotiates and tries to chisel away at the value.   Beyond outlining the intentions of both the buyer and the seller,…
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How To Sell Your Business To A Competitor

How to Sell Your Business to a Competitor
Navigating the sale of a business to a competitor presents a complex but strategic choice for entrepreneurs. It involves not only negotiating a fair price but also aligning strategic objectives and safeguarding the business’s legacy. This article offers a roadmap for business owners considering this path, covering key steps from preparation to deal closure, to ensure a successful transition to new ownership. Understanding The Reasons For a Business Sale In business, deciding to sell, especially to a competitor, is driven by diverse strategic and personal reasons. Business owners must carefully balance the advantages with possible effects on their legacy, staff, and future projects. It's essential for any entrepreneur considering such a pivotal move to fully understand these motivations. Strategic Alignment and Market Consolidation When selling a business to a competitor, leveraging complementary strengths can create a stronger market presence by merging unique competencies, enhancing product offerings, and improving efficiencies. This…
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Building Your Expert Team to Sell Your Business

Image of CFP giving financial advice
When planning to sell your business, the difference between a good deal and a great one often comes down to the team you have in your corner. Selling a business isn't just a transaction; it's a major life event that requires strategic planning and execution to maximize value. Let’s take a look at the expert team you need to help you. The Expert Team for Maximizing Business Value 1. Wealth Manager: Your wealth manager is the linchpin in aligning the sale with your long-term financial goals. The sooner you can bring in a wealth manager who has expertise in the process of selling a business, the better they can get to know you to serve your needs.  While their role might be more strategic and advisory, they ensure that the proceeds from the sale fortify your overall financial health and wealth strategy.  They also serve as the “quarterback” of your…
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Preparing Your Business For Sale

Preparing your business for Sale, represented by image of businessperson working on laptop
When it comes to preparing your business for sale, the journey involves much more than just putting a price tag on it; it requires meticulous preparation and strategic positioning to ensure that your business is an attractive asset to potential buyers. Beyond knowing how to sell your business, at the core of preparing is answering the fundamental question: Does the business run independent of your involvement? Can the business operate without you Many entrepreneurs and business owners don’t realize the difference between owning a business and owning a job. If your presence is critical for the daily operations, then you're essentially self-employed; you own a job. This dependency often scales inversely with the business's size. When you are the rainmaker, leader, manager, and CEO all wrapped into one, what you're selling is limited to tangible assets, rather than a sustainable enterprise. A business that can't operate in your absence is…
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Business Valuation and Common Misconceptions and Associated Risks

Women holding iPad, reflecting a business valuation
Maneuvering through the intricate landscape of business valuation can be as challenging as it is critical for owners looking to sell their business - their life's work. The valuation process is not merely an academic exercise but a practical one that can significantly influence the final sale price of a business.  It's essential for business owners to understand that an early, independent valuation serves a dual purpose: it provides a snapshot of the current worth and highlights potential value increases through operational improvements. This article delves into the complexities of business valuation, exploring common misconceptions and strategic considerations to ensure that entrepreneurs maximize their wealth when the time comes to sell. Understanding Different Business Valuation Methods 1. Market Comparison Valuation Approach Also known as the Market Approach, the Market Comparison Valuation Approach, is a method for valuing a business by comparing it to similar businesses that have been sold recently.…
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How to Sell Your Business

How to sell your business represented by image of 2 businessmen shaking hands.
Embarking on the sale of your business is not just about cashing in on your hard work—it's a complex process that reflects the culmination of time, investment, and dedication. This journey to a successful sale begins with understanding the pitfalls and planning meticulously to avoid them. In this guide that follows, inspired by the book Tips & Traps, you’ll benefit from strategic advice and essential steps to maximize your wealth during the sale. It's a path that requires a team of professionals to navigate, ensuring you get the true value for your business while being prepared for both planned and unexpected opportunities. And it all starts with the right mindset. Mindset for Selling Before you can approach the undertaking of selling your business, you will want to understand your motivation for selling. What are the targets you want to achieve? What is your ideal outcome? Whether the intent is to…
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Women and Wealth: Taking Charge of Your Finances

When it comes to financial planning, women are likely to face different challenges than men. For one, they earn less than men on average, and they’re more likely to work part-time jobs or take time away from their careers to raise children and care for family. Time off and lower lifetime income means women face unique financial planning challenges. Here’s a look at some common financial issues women face and strategies to address them. Less income means less money to devote to savings On average, women earn just over $0.80 on the dollar compared to men, leaving them with less money available to pursue financial goals, like saving for retirement. If you work in a job that offers a retirement plan, such as a 401(k), be sure to save as much as you can. The tax advantages of these accounts can help boost your savings potential. If your employer offers…
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6 Steps to Protecting Your Wealth During Divorce

A divorce is one of the most difficult transitions you can go through. When you add uncertainty about money, that transition can get even more stressful. Here are six steps to help keep your finances intact during—and after—a divorce: Step 1. Assess your finances and make a budget As divorce proceedings get underway, take stock of your finances. Start by reviewing your income, retirement accounts, investment portfolio, and insurance policies. Next, make a budget that reflects your income and projected monthly expenses. Include both your personal debts and debts you share with your soon-to-be ex-spouse. Make sure to factor in expenses such as finding new housing or buying a car on a single income. Identify gaps in your budget where you come up short and see where you can make cuts to cover the difference. Step 2. Target shared debts first Debt on joint accounts can be problematic. Whatever your…
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