Four Questions to Ask Yourself When Thinking About Selling Your Business

Written by John O’Rourke, Vice President, Private Banking and Wealth Advisor


After spending years, or even decades, building your business from scratch, the time will likely come when you consider your exit strategy. Perhaps you’d like to retire or pursue other goals. Either way, to maximize the potential of the sale of your business, you’ll need to start planning well before you intend to sell. We highly recommend you consult your trusted financial advisors, such as First American Bank, to guide you through this complex process.

Here are four key questions to consider before planning your exit:

1. How long will it take to sell my business? 

Selling a business isn’t something that’s done on a whim. Preparing to sell your business can take time. Thoughtful planning and implementation over a few years can greatly enhance your chances of a profitable and successful exit. Giving yourself enough time to design a smooth exit is key, and though it varies from business to business, the process generally takes about five to seven years.  The sale will generate capital gains tax liability, so the first step is to reconsider your tax domicile while you have time to establish a new residency.

2. Who should I sell my business to? 

The next step entails determining who your ideal buyer will be. The type of buyer essentially determines how the process will play out. Also, each type of buyer comes with their own unique benefits and considerations.

Selling your business to a family member

When opting to sell your business to a family member, it’s important to designate your successor as soon as possible. Have an in-depth conversation with your designated successor and make sure they are committed to the position and have the skills to successfully assume the role.

Once you have a firm commitment from your successor, you should start getting your new owner up to speed on their new responsibilities. This requires intense mentorship and a huge time commitment for both parties, especially the party that’s stepping down. A financial adviser can help ease transition by handling the nuts and bolts of the sale while you focus on mentorship.

Selling your business to your employees

Employers looking to sell their business to their employees typically do so through an employee stock ownership plan (ESOP). An ESOP is a great option for business owners who want to defer the cost of the capital gains tax. While an ESOP can take several years to implement, it can also provide the seller with favorable tax incentives by way of income averaging and/or deferred capital gains tax treatment.

Because an ESOP can provide a market for shares of a closely-held company, it’s also a viable option for owners who want to make a discreet and quiet exit, and value employee ownership. It can be a win-win for owners looking to sell their business to employees without having to market it publicly.

Selling your business to a third party

If you’re considering a sale to a third party, you’ll want to focus on taking steps that will make your business more attractive to potential buyers. That means boosting profitability, consistent and growing revenue and client base, long-term secure contracts, etc. A financial advisor can also give you an unvarnished assessment of your business’ worth and the changes necessary to increase its value ahead of a sale. This might entail identifying and cutting unnecessary expenses in order to drive profits.  Demonstrated growth and consistent earnings underpin value.

3. What are the potential tax implications of selling my business? 

When selling your business, tax considerations like the capital gains tax rate can drastically affect how much you pocket post-sale. For example, the capital gains tax rate is expected to rise as early as 2022, which means you might end up paying an additional 19.6% in taxes on the sale of your business if you sell after the proposed tax changes take effect. If you’re in a position to sell while the tax rate is still low, it’s a good idea to get the process started.

Tax considerations are just one of the factors where professional advice and planning can really pay off. For example, one business owner sold his company for upwards of $40 million in a state with a significant capital gains tax rate. Had the owner planned in advance and sought the right guidance, he could have established residency in a state with 0% tax and walked away from the sale with the extra $2 million they paid in taxes. That’s a major loss that could have been avoided.

4. I’m ready to sell in a few years’ time. What steps should I take now? 

Business owners are best served by working with an accountant or financial advisor to make sure your balance sheets, financial statements, and other documentation is in order. By getting your finances ironed out, you’ll be ready whenever an opportunity to sell arises.

A successful transfer usually requires foresight, planning, and expert guidance. To get the most out of your sale, contact one of First American Bank’s advisors today.

Maximize Your Future Business Sale

Start Planning Today


Connect with John on LinkedIn

Phone 305-400-3334
Email: business@firstambank.com

Disclosure: First American Bank is a Member FDIC.  

Check out more articles from First American Bank:

Three Products that Protect Against Fluctuating Market Rates

Maintaining Steady Cashflow Throughout Business Cyclicality

The Healthcare Account Helping Companies Save

Liquidity Strategies for Growing Businesses

You May Also Like
What Every Manufacturer Should Know About Rising Oil Costs

Written by William M. Adkinson, Vice President, Fixed Income Manager, Equity Analyst, Portfolio Manager As a manufacturer, your business runs on fuel, literally and figuratively. But due to increased energy

Read More
How First American Bank Helped This Bottle Manufacturer Drive Success

Written by: Sarah Eikenberry, Vice President, Commercial Lending, First American Bank Nearly all new businesses face similar struggles as they push off the ground. Managing cash flow, balancing steady growth

Read More
Prepare for Business on the Global Stage

Author: Bastiaan Van Den Berg, Senior Vice President, International Banking “98 percent of all U.S. companies that export goods and services are small businesses.” Small and mid-size organizations account for an

Read More
Three Products that Protect Against Fluctuating Market Rates

Written by Steve Eikenberry, Senior Vice President, Commercial Lending With the recent increase in interest rates and the prospect of the Federal Reserve raising short-term rates by up to 1.75%

Read More
Other Posts
Understanding Volatility in an Era of Economic Uncertainty

Written by John O’Rourke, Vice President, Private Banking and Wealth Advisor Rapid changes in asset prices—otherwise known as volatility—are an ever-present, often anxiety-inducing force in all markets. Yet, when considering

Read More
One Manufacturer’s Journey to Success Using Smart Lending Solutions and a Personalized Partnership

In 2008, a small medical device manufacturer with a unique niche came to First American Bank seeking guidance. Specializing in highly specialized sterile procedures, the company wanted to expand their

Read More
Inflation is Here. Plan Ahead and Protect Your Business With These Three Strategies

Author: Brian Hagan, First American Bank Florida Market President   If you’re worried about the effects of inflation and resource scarcity on your business, taking early action to maintain profitability

Read More
Leaving Your Business in Good Hands: A Guide to Selling to Your Employees

Written by James Walrack, ESOP Specialist   Selling your business is a complex and often emotional process that is best not rushed. Even if you’re in the early stages of

Read More

Drew Limsky

Drew Limsky



Drew Limsky joined Lifestyle Media Group in August 2020 as Editor-in-Chief of South Florida Business & Wealth. His first issue of SFBW, October 2020, heralded a reimagined structure, with new content categories and a slew of fresh visual themes. “As sort of a cross between Forbes and Robb Report, with a dash of GQ and Vogue,” Limsky says, “SFBW reflects South Florida’s increasingly sophisticated and dynamic business and cultural landscape.”

Limsky, an avid traveler, swimmer and film buff who holds a law degree and Ph.D. from New York University, likes to say, “I’m a doctor, but I can’t operate—except on your brand.” He wrote his dissertation on the nonfiction work of Joan Didion. Prior to that, Limsky received his B.A. in English, summa cum laude, from Emory University and earned his M.A. in literature at American University in connection with a Masters Scholar Award fellowship.

Limsky came to SFBW at the apex of a storied career in journalism and publishing that includes six previous lead editorial roles, including for some of the world’s best-known brands. He served as global editor-in-chief of Lexus magazine, founding editor-in-chief of custom lifestyle magazines for Cadillac and Holland America Line, and was the founding editor-in-chief of Modern Luxury Interiors South Florida. He also was the executive editor for B2B magazines for Acura and Honda Financial Services, and he served as travel editor for Conde Nast. Magazines under Limsky’s editorship have garnered more than 75 industry awards.

He has also written for many of the country’s top newspapers and magazines, including The New York Times, Washington Post, Los Angeles Times, Miami Herald, Boston Globe, USA Today, Worth, Robb Report, Afar, Time Out New York, National Geographic Traveler, Men’s Journal, Ritz-Carlton, Elite Traveler, Florida Design, Metropolis and Architectural Digest Mexico. His other clients have included Four Seasons, Acqualina Resort & Residences, Yahoo!, American Airlines, Wynn, Douglas Elliman and Corcoran. As an adjunct assistant professor, Limsky has taught journalism, film and creative writing at the City University of New York, Pace University, American University and other colleges.