But before you put out a “for sale” sign in your window, take the time to plan the sale of your business carefully.

“It takes a lot of planning if you want to get something out of it,” said John Kenney, an attorney and partner with Lineberry Kenney LLC’s Poulsbo office.
In order to maximize the value of the sale, as well as to ensure a smooth sales process, keep in mind the following factors.

Plan the timing. The first decision that has to be made is when you want to get out of the business. You’re liable to get a better sales agreement if you set up a timeline that allows you enough time to complete the sales process in a thoughtful manner. At a minimum, said Kenney, most businesses will take between four and six months to plan a sale. Moving any faster than that may cause confusion and dissent within the company.

“You don’t’ want to throw the business into turmoil,” he said.

Identify who is going to take over the business. You may have an employee, family member or business partner in mind who you think would be a good fit to run your business. If not, you may want to hire a business broker to find suitable buyers for the company.

Decide what you want out of it. Are you looking for financial satisfaction? Do you want to continue to have some kind of relationship with the business? If you are looking for purely financial gain, do you want full, fair market value, or are you willing to take structured payments over the years?

A straight purchase and sale agreement where the seller gets one lump sum payment up front from the buyer is the least complicated arrangement, said Kenney, and also poses the least risk. Accepting structured payments may mean losing significant dollars down the road if the buyer closes or loses the business after only a few years.

“A structured payment agreement shouldn’t be any more than five years,” said Kenney. “And at a minimum get a large chunk of money up front.”

A common structured payment agreement uses a “share pledge” agreement, which is, in its simplest terms, an agreement where the buyer uses shares of the business as collateral, so if the buyer defaults on payments, the seller can step back in.

Determine the value of the business. Few business owners can say, with precision, what their business is actually worth. For this reason, said Kenney, it’s usually a good idea to work with a group of advisors to determine a real value before putting the business on the market.

“Differing ideas of value is the thing that I find most often that will kill a deal,” said Kenney.

At a minimum, said Kenney, the business owner should hire a CPA for this task, but a much better approach would be to hire a business appraiser.

“Their entire lives are spent determining the value of businesses,” said Kenney.

With an objective, third party appraisal in hand, business owners can have an accurate measure of what the business is truly worth, in dollars and cents.

“There’s an old saying that ‘accounting is the language of business,’ and that’s true,” said Kenney.

Maintain confidentiality. Once you make the decision to sell, keep quiet about it. Don’t broadcast it to employees, competitors or customers. It’s fairly common, said Kenney, for businesses entering into sales discussions to sign letters of intent that include confidentiality clauses.

“You don’t want employees to get antsy and leave,” said Kenney.

In addition, such publicity may have an adverse effect on the business, driving down the value in the eyes of potential buyers. And if a deal kept confidential falls through, other potential buyers won’t be aware of it, so you won’t look desperate if the business has to go back on the market.

Consider what you’ll do with the money. A successful sale of a business can put significant amounts of money into your hands. Before that happens, sit down with a financial advisor to plan how best to invest that money so that you can build on those funds to help ensure a comfortable retirement. It’s also a good idea to meet with a tax professional to discuss the potential income tax implications that may affect you after selling the business.

As you approach retirement, take the time to plan the future of your business. You’ve worked hard to make it successful, and now it can help ensure you live the retirement lifestyle you’ve always wanted.

(Editor’s Note: This article is designed for informational purposes only and is not intended as legal or financial advice. You should seek the advice of your own attorney, corporate counsel and/or tax professional if you have specific questions about the issues addressed here.).