The Business Sale: From Valuation to Closing

Well, I think too because in, 'cause when you sell the business, like there's different routes that you can take, which we can get into, right? Like how you actually structure the sale.

Like are you getting a lump sum cash amount? Are yous doing like a, a note carry? Are you doing like a deferred sale, right? So I, I think the importance of going through this practice, it's like you can model up those different scenarios, meaning, and this kind of comes back to the whole successful outcome because, yeah, your business is your baby.

You know, there's a lot of things that are tied to your business, not only the, the daily habits, where you're going to work, maybe the, the employees, your business partners.

Like, there's a lot to be said about that.

But generally speaking, when you look at, you know, whether you're self-employed or working a W2 job, y- you're there for economic benefit, right? It's, it's funding your lifestyle.

It's, you know, you get the paycheck, all of that.

And obviously with the business, you're just building equity, hopefully, along the way so it turns into a potential sale.

But when you do this practice, then you're not necessarily at the mercy of, okay, what is, what is the, the buyer offering? Is that number gonna work? It's, it's like then it, then it puts to bed kinda, Nick, what you put it, what you said is if there's a disconnect between what the seller is anticipating to be their number and what is reality, meaning- We could look at it, and this kind of goes down to, like, general retirement planning and, and financial planning too.

It's like, okay, we gotta di- we gotta dial in cash flow, we gotta dial in expenses, we gotta dial in the investment side of things.

'Cause when you sell your business, remember, your business was probably your income producer.

Like, y- you're getting your, your owner distributions, you're getting your W-2s.

Maybe you're still using that business income to fund retirement accounts, like building your nest egg.

Like, or maybe you weren't because, you know, you're just putting every- you're reinvesting everything into the business.

So when you go through this process, you get that formal valuation, then you can take that number, and this could be vice versa, too, where you then incorporate into the plan and say, "Okay, based on my needs, my wants, my wishes, my desires, my successful outcome in retirement for myself, my family, my estate plan, my overall wealth plan," Jeff, as you said.

Once that's all figured out, then you know, okay, here's, here's the number that I need, like, to fund.

And then, then when you get that formal valuation, it's like, how far are we off? Is there a disconnect to the downside where it's like, okay, now, now we gotta set up a, an, an, a game plan, an execution plan to get the valuation to where we need it to be based on the planning that we've done, or maybe it's on the flip side, like we said, where maybe that number's higher, which is kinda like icing on top of the cake where it's like-

Right

... great, now we can incorporate, now we can kinda incorporate what that, what that wealth picture looks like to include taxes, to include all of that, right? So that's why I think it's really important to, like, understand not looking at the business sale, like, on an island.

It's, like, yes, we know that that's a process and that, and that needs to go smooth, and there's a lot of things that could go wrong, so we wanna make sure that those logistics are tight.

But at the end of the day, when that business transaction, when that business sale is complete, it has to then translate into the, the new plan of operations because, again, you sell business, you're not, you're not gonna have income.

Maybe you have some write-offs through the business that you no longer have, so that's gonna change the, um, that's gonna change the tax component.

So all these things are, are so important.

Jeff, real quick, so let, I know we covered this on the radio show, but let's just revisit it.

So let's imagine that seller, uh, is not at the number that they need.

So let's imagine we run through the planning, all their goals, their cash flow, and we know they need X amount, but the offer that they're receiving is lower than that, for whatever reason, right? And again, we're still hopefully looking at that three-year, that three-year r- runway.

Well, I think too because in, 'cause when you sell the business, like there's different routes that you can take, which we can get into, right? Like how you actually structure the sale.

Like are you getting a lump sum cash amount? Are yous doing like a, a note carry? Are you doing like a deferred sale, right? So I, I think the importance of going through this practice, it's like you can model up those different scenarios, meaning, and this kind of comes back to the whole successful outcome because, yeah, your business is your baby.

You know, there's a lot of things that are tied to your business, not only the, the daily habits, where you're going to work, maybe the, the employees, your business partners.

Like, there's a lot to be said about that.

But generally speaking, when you look at, you know, whether you're self-employed or working a W2 job, y- you're there for economic benefit, right? It's, it's funding your lifestyle.

It's, you know, you get the paycheck, all of that.

And obviously with the business, you're just building equity, hopefully, along the way so it turns into a potential sale.

But when you do this practice, then you're not necessarily at the mercy of, okay, what is, what is the, the buyer offering? Is that number gonna work? It's, it's like then it, then it puts to bed kinda, Nick, what you put it, what you said is if there's a disconnect between what the seller is anticipating to be their number and what is reality, meaning- We could look at it, and this kind of goes down to, like, general retirement planning and, and financial planning too.

It's like, okay, we gotta di- we gotta dial in cash flow, we gotta dial in expenses, we gotta dial in the investment side of things.

'Cause when you sell your business, remember, your business was probably your income producer.

Like, y- you're getting your, your owner distributions, you're getting your W-2s.

Maybe you're still using that business income to fund retirement accounts, like building your nest egg.

Like, or maybe you weren't because, you know, you're just putting every- you're reinvesting everything into the business.

So when you go through this process, you get that formal valuation, then you can take that number, and this could be vice versa, too, where you then incorporate into the plan and say, "Okay, based on my needs, my wants, my wishes, my desires, my successful outcome in retirement for myself, my family, my estate plan, my overall wealth plan," Jeff, as you said.

Once that's all figured out, then you know, okay, here's, here's the number that I need, like, to fund.

And then, then when you get that formal valuation, it's like, how far are we off? Is there a disconnect to the downside where it's like, okay, now, now we gotta set up a, an, an, a game plan, an execution plan to get the valuation to where we need it to be based on the planning that we've done, or maybe it's on the flip side, like we said, where maybe that number's higher, which is kinda like icing on top of the cake where it's like-

Right

... great, now we can incorporate, now we can kinda incorporate what that, what that wealth picture looks like to include taxes, to include all of that, right? So that's why I think it's really important to, like, understand not looking at the business sale, like, on an island.

It's, like, yes, we know that that's a process and that, and that needs to go smooth, and there's a lot of things that could go wrong, so we wanna make sure that those logistics are tight.

But at the end of the day, when that business transaction, when that business sale is complete, it has to then translate into the, the new plan of operations because, again, you sell business, you're not, you're not gonna have income.

Maybe you have some write-offs through the business that you no longer have, so that's gonna change the, um, that's gonna change the tax component.

So all these things are, are so important.

Jeff, real quick, so let, I know we covered this on the radio show, but let's just revisit it.

So let's imagine that seller, uh, is not at the number that they need.

So let's imagine we run through the planning, all their goals, their cash flow, and we know they need X amount, but the offer that they're receiving is lower than that, for whatever reason, right? And again, we're still hopefully looking at that three-year, that three-year r- runway.