How to build the right team to guide the sale of a business

It’s not easy making the decision to sell a business, but doing so can pave the way to an exciting new chapter of a business owner’s life. Those who sell won’t be alone: Three-quarters of owners would like to exit their businesses in the next 10 years, according to a 2023 survey by Exit Planning Institute, a nonprofit that provides educational support to advisors.¹

Many owners are being proactive about their next step, with 68% seeking outside advice on how to go about a sale, the same survey found. There’s a good reason: Whether they plan to sell their business to a family member, another business or an investment fund, this transaction can have a major impact on their future.

“Many small business owners have over 90% of their net worth tied up in their business, and they may sell the business to help fuel their retirement funding,” says attorney Andrew Sherman, a partner at Brown Rudnick who advises clients on mergers and acquisitions (M&A) and is author of the book Mergers and Acquisitions from A to Z.

It’s important to work with a collaborative team of advisors and experts who can help position the business competitively while keeping the owner’s personal financial goals in mind, Sherman notes. Here are some experts business owners may need on their team. 

A business banker plays a key role in guiding the sale of a business. By understanding the business owner’s professional and personal goals, they can provide strategic advice and recommend actions to help achieve those objectives. This includes offering insights on the financial aspects of the transaction, assisting with business valuation and suggesting other experts who may be needed on the team. The banker can also offer advice on market factors, such as industry trends in interest rates, that could impact the sale.

Succession planning is essential for businesses of all sizes. Whether big or small, engaging a business banker early in the process to create a tailored action plan can help ensure the business is well-prepared for the transition. 

Financial advisors focus on the personal financial aspects of the transaction. For many business owners, both their financial assets and income are tied to their business.  Financial advisors were ranked the most trusted advisors in business sales in the Exit Planning Institute’s survey,² and many small business owners rely more heavily on their advisor than any other expert.

Financial advisors work with business owners so they can try to maintain their desired lifestyle once they no longer have access to business income. To that end, an advisor will need a thorough understanding of the owner’s financial situation, including a snapshot of all the benefits they receive through the business, such as health insurance. With this information in hand, they can help the owner take stock of their objectives for their income, gift and estate planning and philanthropy after the sale. Once the advisor understands their finances and priorities, they can help the owner consider different avenues for trying to reach their goals and develop an investment plan for the sale proceeds that reflects the seller’s desired return requirements, risk tolerance and lifestyle.

If an advisor is involved early in the process, they can explore potential strategies that may enable the owner to transfer some or all the upside potential of the business out of their estate. Widely used strategies include the grantor-retained annuity trust (GRAT) and the sale of assets to an intentionally defective grantor trust (IDGT). In their simplest forms, both types of transactions transfer the potential increase in value of the asset, rather than the asset itself.

It’s important for business owners to realize that certain potential tax-saving strategies begin to evaporate as the sale approaches. Considering wealth transfer, income tax and investment strategies as early as possible with a financial advisor can potentially save substantial amounts of money and maximize opportunities to create more wealth.

Before an owner sells a business, it’s important that its books are in good order. The accountant will likely want to perform an audit of the company’s financial statements to identify and help resolve any bookkeeping or tax matters ahead of the negotiations. If the company has fallen behind on record-keeping or the books need to be cleaned up, several months should be set aside to get caught up.

An audit by an accountant can also shed light on the tax consequences of different sale structures. Allowing extra time for the accountant to explore various scenarios with the leadership team may pay off when it comes time to sell.

A transactional attorney will guide an owner on structuring the deal, negotiating terms and conditions, drafting all necessary agreements and spotting potential obstacles. The attorney will also ensure compliance with regulatory requirements.

“Make sure that the specialist has both buy- and sell-side experience because they'll know what’s standard and what's not and understand issues like allocation of risk,” Sherman says. “If you have either a general lawyer or one that's only been on one side of the transaction, you're not going to get the kind of holistic advice that you're counting on to protect your interests both during and after closure.”

The attorney may also recommend an up-front legal diligence review so the owner can address any legal concerns prior to putting the business up for sale. 

The accountant or attorney may recommend the owner bring in another team member: a business appraiser. Business appraisers, or valuation advisors, provide opinions on the value of the enterprise, the stock involved in pre-transaction gifting and management compensation. Often engaged long before the sale gets underway, they may help identify value in intangible assets, intellectual property and goodwill for tax and financial reporting purposes.

In many sales, an owner may decide to gift or sell minority interests to children or make a charitable donation. Those gifts must be substantiated with an independent appraisal by a valuation advisor. Appraisers are also required whenever company equity is offered to management as part of compensation or when company shares are owned in an employee stock ownership plan (ESOP).

Appraisers can also identify value drivers for companies and industries. And they can identify potential buyer concerns in a consulting context, without issuing a formal appraisal.

A business broker, mergers & acquisitions advisor or investment banker can help position a business for sale and market it to potential buyers. Although owners can potentially do that on their own, a broker is likely to have a network of potential buyers who are not in their own professional network.

“If there are multitude of potential buyers, you may want to hire a broker to manage the process,” Sherman says. “But if you're in a niche business where there are really only three companies that would buy you, you may choose not to have an intermediary because your choices are so obvious.”

These advisors may also help the owner with strategic decisions, like the timing of the sale. “Prior to launching any sale process, we discuss our client’s objectives in the context of market trends and industry dynamics to assist the client with their assessment of the optimal time to explore a sale,” says James Rourke, Investment Banking Director at Bank of America. Rourke says, “Initial discussions with a client often center on determining how best to maximize value while minimizing disruption to the business and achieving an outcome that is consistent with the client’s vision for the legacy of the company post transition.”

The sale of a company is more like a marathon than a sprint. During the process, the best route to a successful transaction will usually become clear. Once an owner knows how much the business is worth, they can work with their financial advisor to determine if they need any additional sources of funds to achieve their retirement goals. If they had the opportunity, prior to the sale, to work with their financial advisor on positioning investments and developing a post-sale investment plan, they’ll now be able to move forward on that investment strategy.

Keep in mind that selling a business is more than a professional and financial transition — it’s also an emotional one. It is helpful for owners to allow themselves time to get used to life beyond their business. “Many small business owners find their feeling of self-worth is tied to the company and as much as they know they're ready to sell the company, they struggle with who they are, what they will be and what happens that first Monday when they don’t have 100 people counting on them,” Sherman says.

Ultimately, many business owners find that after an exit it’s fun to pursue other projects, whether it’s a new business, philanthropy, travel, time with grandchildren or something entirely different. For owners who took the time for financial planning along the way, this phase of life can be more rewarding, because they’ll have the peace of mind to enjoy their new pursuits without worrying about generating business income.  

¹ Exit Planning Institute, “2023 National State of Ownership Report."

² Exit Planning Institute, “2023 National State of Ownership Report"​