Planning ahead is key to selling a business

Hew Hallock, Director of Research, SLV-DRG, hhallock@slvdrg.org

ALAMOSA – Most businesses in the San Luis Valley are small, family-owned and family-run operations

with much of the family’s wealth invested in that business. When it comes time to sale the business or

transfer ownership to a family member, the decision can be difficult. There may be years of work and

sacrifice invested in the business’ success. Taking planned and deliberate steps toward this transition

can ease the process.

“It is important – well ahead of time – to have a succession plan,” according to Jason Medina, director of

the San Luis Valley Small Business Development Center in Alamosa. “To quote Benjamin Franklin, ‘If you

fail to plan, you are planning to fail!’ ”

Here are a few suggested actions gleaned from several sources that can help with a business transition:

Analyze the Current Economic Climate

Evaluate what is happening in the overall economy, locally, and in your business sector that could affect

the sale of your business. Are interest rates high or low? Is your industry growing and what is the

potential for growth in your region? Put together a list of potential buyers that should include family

members, current employees, and competitors

According to Medina, it is important to include others who may be effected by your business transition,

particularly employees. “Be inclusive. Train employees to know what you know. They have an interest in

your business and no one wants to see a business fail.”

Build a Group of Advisors

Most businesses already have a small group of professionals that help steer you and your business.

People like an accountant, banker, insurance agent, attorney, financial advisor, or trusted business

associate. Bring them together as an advisory group to help guide your transition. Each member will

bring expertise from their field that can be valuable in developing your transition strategy. Seek their

advice on possible deals and impacts on assets, taxes, and legal issues.

Prepare Your Business

The goal is to maximize the value of your business. Is it “exit-ready”? Look for issues that might

negatively affect the sale. Review tax documents; confirm that financial documents are up-to-date,

accurate, and provide transparency of financial condition; and be sure corporate papers are current.

Value Your Business

This is perhaps the most critical step in business transition planning. Work with a business broker, your

banker, or your accountant to do an estimated valuation of your business. A valuation early in the

process will give you an idea of the value of your business and give you time to address issues.

In determining the value of your business, consider more than the value of inventory and real estate.

“Try to monetize the reputation, respect, and good name your business has earned over the years,”

advised Medina. “They are valuable to you and the buyer.”

Determine Personal Financial Needs

Decide how much money you need to meet your financial goals after the business sale. Do expected net

proceeds meet those goals? Include tax obligations in that calculation.

“It is really important, years ahead, to plan your retirement. Don’t sell yourself short,” Medina offered.

Talk With Your Family

Let your family know you plans as soon as possible. Especially if family members are involved in the

business. Failure to keep them informed can cause lasting conflict in the family.

The San Luis Valley Small Business Development Center can assist business owners in planning the sale

of their business by one-on-one counselling with a strategic planning consultant and a business

succession planning template. Contact Jason Median at the SLV-SBDC at (719) 589-0312, or go online to

www.slv-sbdc.com.

END

Jason Medina is director of the San Luis Valley Business Development Center.

Questions?

Contact us at 719-589-3681 or email AlamosaCountyChamber@gmail.com.