As a business owner, you will likely face a difficult decision: whether to keep or sell your company. This may happen over time as you set your sights on retirement. Or it may happen more suddenly, for example, when confronted with an unsolicited offer, favorable market conditions or the need for capital.

Regardless of the trigger, having a plan ahead of time can help you maximize the value of your business, whether through a sale or as a continued source of income for you and your family.
But easier said than done. We know from serving other business owners that this decision often involves answering complex questions and dealing with strong emotions.
To make it easier for you, here are some questions to consider and discuss with your family and advisors.

Is your business a financial asset, or more, to you and your family?

Most business owners care deeply about their company and employees. But for some, the value of their business runs even deeper than taking care of their company’s stakeholders financially. It is part of their family’s history and identity, something they would like to pass down to their children or other beneficiaries. If that is the case, you should adopt strategies for being able to keep your business in the family. If not, you will want to adopt a different set of strategies for readying your company for a sale.

Is someone willing and able to inherit your business?

If you determine that you would rather pass your business down to your children or other beneficiaries, you should carefully consider whether suitable successors exist. Is the next generation interested in running your business? Have you talked to them overtly about this possibility? Are they capable? Do you believe they will have the right motivations and skills to continue your hard work and vision? This is often one of the most difficult pieces of succession planning for business owners to address. But not proactively doing so can create much more difficult situations — such as family conflict and declining business value, down the road.

Can you afford to sell (or keep) your business?

Answering this question can be broken down into a three-part exercise:

  • PART ONE | Valuing your business
    Among privately held companies, 98% haven’t been valued(i). But this number is arguably the most important input needed to determine if you should sell your business, not to mention knowing if it is properly insured and funded.
    If, like many business owners, what’s stopping you is a lack of time and/or concerns about the expense, know that you have options. While a certified business valuation, one that adheres to the Uniform Standards for Professional Appraisal Practice (USPAP) guidelines,is needed in certain situations, simpler options exist. For example, our firm partners with BizEquity, a patented, online service that makes business valuation easier and more affordable.
  • PART TWO | Quantifying your personal goals
    The other necessary side of the equation is, of course, how much money do you need? What are your plans for retirement? What large purchases (e.g., a second home) do you plan to make? How much money would you like to leave to family or charity? Identifying and quantifying the cash outlays associated with these goals will then allow you to reconcile them with the cash inflows (net of taxes) associated with keeping or selling your company. The numbers may surprise you, possibly making the decision much easier.
  • PART THREE | Understanding what it would take to sell your business
    It is also possible that, through the first two parts of this exercise, you determine that you would need to invest significant time, money and effort into increasing the value of your company in order to sell it. If that is the case, you need to ask yourself: Am I willing to put in the effort to make my business more attractive to potential buyers? This often includes initiatives such as further developing your leadership team, investing in operating systems and diversifying your customer base. Confronting this reality helps some business owners decide their company is more of a lifestyle business than a growth-oriented business, worth sustaining for as long as possible for the income rather than preparing for a future sale with the hopes of a financial windfall.

GROWTH-ORIENTED BUSINESS

Experts describe a growth-oriented business as capable of renewing itself through changing generations of technology, employees, and customers. In other words, the business can survive and prosper after the founder is no longer a part of it. This doesn’t mean that you cannot sell your business if you haven’t accomplished that status, but any buyer will most likely consider where you are on that path and what needs to be done for your business to be self-sustainable.

LIFESTYLE BUSINESS

A lifestyle business is a business set up and run by its founders primarily with the goal of sustaining or supporting the income and personal requirements of the owners. To some extent, it is still profit-oriented, but revenue maximization is not at the top of its list of priorities. Typically, the goal of many lifestyle businesses is not to sell because, without the founders involved, the business may not be
the same.

Download PDF
Print

All securities are offered through Hightower Securities, LLC, member FINRA and SIPC, and advisory services are offered through

Hightower Advisors, LLC, a SEC registered investment advisor. In preparing these materials, we have relied upon and assumed without

independent verification, the accuracy and completeness of all information available from public and internal sources. Hightower

shall not in any way be liable for claims and make no expressed or implied representations or warranties as to their accuracy or

completeness or for statements or errors contained in or omissions from them. This is not an offer to buy or sell securities. No

investment process is free of risk and there is no guarantee that the investment process described herein will be profitable. Investors

may lose all of their investments. Past performance is not indicative of current or future performance and is not a guarantee. This

document was created for informational purposes only; the opinions expressed are solely those of the author, and do not represent

those of Hightower Advisors, LLC or any of its affiliates.

Hightower Advisors, LLC is an SEC registered investment advisor. Securities are offered through Hightower Securities, LLC member

FINRA and SIPC. Hightower Advisors, LLC or any of its affiliates do not provide tax or legal advice. This material is not intended or

written to provide and should not be relied upon or used as a substitute for tax or legal advice. Information contained herein does not

consider an individual’s or entity’s specific circumstances or applicable governing law, which may vary from jurisdiction to jurisdiction

and be subject to change. Clients are urged to consult their tax or legal advisor for related questions.

Citations

(i) Early, Jason and Medico, Bill. “Jason Early and Bill Medico on Serving Small Business Owners,” BizEquity, https://blog.bizequity.

com/jason-early-and-bill-medico-on-serving-small-business-owners. Accessed April 22, 2022.

E/ contact@6meridian.comP/ 316.776.4601 / 855.334.2110F/ 316.776.4620
www.6Meridian.com 8301 E. 21st Street N. Ste. 150, Wichita, KS 67206

6 Meridian is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC, member FINRA and SIPC. Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC.

This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is neither indicative nor a guarantee of future results. The investment opportunities referenced herein may not be suitable for all investors. All data or other information referenced herein is from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other data or information contained in this presentation is provided as general market commentary and does not constitute investment advice. 6 Meridian and Hightower Advisors, LLC or any of its affiliates make no representations or warranties express or implied as to the accuracy or completeness of the information or for statements or errors or omissions, or results obtained from the use of this information. 6 Meridian and Hightower Advisors, LLC assume no liability for any action made or taken in reliance on or relating in any way to this information. The information is provided as of the date referenced in the document. Such data and other information are subject to change without notice. This document was created for informational purposes only; the opinions expressed herein are solely those of the author(s) and do not represent those of Hightower Advisors, LLC, or any of its affiliates.

Hightower Advisors, LLC or any of its affiliates do not provide tax or legal advice. This material is not intended or written to provide and should not be relied upon or used as a substitute for tax or legal advice. Information contained herein does not consider an individual’s or entity’s specific circumstances or applicable governing law, which may vary from jurisdiction to jurisdiction and be subject to change. Clients are urged to consult their tax or legal advisor for related questions.