Business changing hands? Here's what Columbus wealth planners advise before signing on the dotted line.

Although the onset of the novel coronavirus has already caused unprecedented effects on the U.S. and world economies, until recently, businesses have been changing hands at a staggering rate. As many baby boomers have been considering their retirement plans, paired with a market that’s been flush with cash in recent years, more than 10,300 businesses were sold in 2018 and more than 9,700 last year, according to BizBuySell.com.

Even in the best of times, selling a company ends up being more than the average business owner bargained for. And with 45 percent of sales considered opportunistic, having a plan before an offer is presented is critical to getting the best value and ensuring the business’ health into the future.

We're here to help you stay in touch with what's going on out there. Read our latest reporting on the coronavirus response here.

To help present a complete picture of what you should be considering when you begin thinking about selling your business, Columbus CEO spoke with wealth planners and business owners to hear what they believed to be the most important things to consider when preparing to sign that final dotted line. And while the current crisis has forced most entrepreneurs to stop and consider their long-term prospects (and probably how they’re going to make payroll this month), what those experts had to say could come in handy once the future seems clearer.

Ask yourself: Am I ready?

Before getting into the weeds of balance sheets and financial projections, take a step back and think about the big picture: Are you ready to do this?

“Before someone sells their business, they should be thinking about their personal vision—how much will their lifestyle cost them, what they are going to be doing in the near future and in their retirement,” says Kori Manus, a wealth management adviser with Heartland Planning Associates. “Do they want to travel? Be close to family? Take into account philanthropy? Health costs? We really want people to understand what their vision is before making decisions.”

Along with feeling confident about selling, it’s crucial to understand the effort involved in the process.

“It’s one thing to feel like you’re ready to let go and move on to other things in life,” says Adam Koos, president and portfolio manager of Libertas Wealth Management Group. “It’s another thing to start crunching numbers, meeting with your selling team, and to sit face-to-face with buying candidates that you’ll inevitably need to interview. Selling this thing you’ve built takes on a new kind of life.”

Get help

As a business owner, you’ve probably become extremely well-versed in your particular area of focus. That doesn’t mean you have the skills or experience needed to sell a company and get the best outcome. Richard Hetsko, former owner of Oberlin Hearing Care, sold his practice in Oberlin last year and is awaiting the final closing. As a doctor, he was happy to listen to the advice of business experts when it came time to sell.

“I’m an audiologist, so my business experience was basically nil,” Hetsko says. “I realized I needed help selling, determining how that would interact with both my business and personal finances, and the advice I received from my financial planner was crucial.”

Be ready for opportunities

Not surprisingly, many business owners have a lot of work to do when it comes to preparing to sell their company. But if the predictable aspects of a sale are already prepared for, owners can be positioned to take advantage of good opportunities to sell if they arise.

“Many business owners fly by the seats of their pants, and by the time they’ve procrastinated about ‘selling someday,’ a life-altering event takes place and they’re forced to get rid of the business in a fire sale,” Koos says. “Plan ahead. Have your non-disclosure agreements signed, know what your business is worth, put together a comprehensive evaluation, and use the information to grow in the right way so that you can sell for more when you’re ready.”

Get your financial house in order now

If there is one commonality among business owners considering selling their companies, it’s that hardly any of them have things nearly as in order as necessary, Manus says.

“I recommend five years minimum to prepare for your sale, typically,” Manus says. “I would even prefer to have a 10-year horizon, but that’s not realistically how it happens. I’m a believer that even if you have no intention of selling, it’s always a good time to be preparing for it. You should be running your business like you’re going to sell next year.”

Plan for your employees

The decision to sell is going to affect more than just yourself and your family, Koos says. If you are at all concerned about the long-term health of the business you’re selling, you should incorporate how you want things to turn out for your employees into the planning process.

Stay up to date with the region’s business scene. Subscribe to Columbus CEO’s weekly newsletter.

“Do you have a team member who acts as your right hand who would also be instrumental to the longer-term success of the company post-sale?” Koos says. “Perhaps you want to provide some sort of job security as you negotiate with buyers. Having staff who are trained veterans can provide peace of mind to the buyer in question as they are individuals who can often assist with ensuring a smooth transition, post-sale.”

Know your value

At the end of the day, your business is worth what prospective buyers are willing to pay for it. This advice ties into relying on your team of advisers—they can help you get a clear, unemotional picture of your business’ value.

“So many times you’ll see owners without a clear picture of what their company is worth,” Manus says. “They think it’s worth more than it is, or inflate numbers—they’ve never done the math. The due diligence required prior to selling, very few business owners actually do it, unless they were working with an adviser.”

Trust yourself

Relying on your expert advisers is crucial during the sale process, but the final decisions ultimately fall to you, business owners say. Do your due diligence, get all the good data and advice you can, but don’t discount your own instincts—and that goes for buying a business, as well as selling one.

“I would tell prospective buyers not to hesitate to get the information they need to comfortably complete the deal,” says Rick McCann, president and recent buyer of Mid Ohio Golf Car. McCann says he got lucky with the quality of staff he inherited, but wishes he would have advocated for more information in the buying process. “The way you have to look at it is if the deal falls through because the seller becomes uncomfortable with your need to fully understand what you are buying, then the deal probably should not have progressed. As a buyer, you have more leverage than you might think.”

Hetsko says he went into private practice in 2001 after the multi-specialty practice he was a part of dissolved. Based on advice at the time, he set up his small business as a C-corp, which didn’t turn out to be the best way to position his new company.

“I took the best advice I had at the time, but found out selling a C-corp is very different from selling an LLC or sole proprietorship,” Hetsko says. “I would say take the best advice of the advisers you have, but make sure you do your own double-checking and research to make sure [that advice is] valid.”

Lin Rice is a freelance writer.