business valuation

Succession Strategies

How to avoid needless risk, restless nights when selling a +$10 million business

Carl Sheeler offers actionable tips for owners seeking to enhance company value the right way.

DURANGO, Colo., April 27, 2017 /PRNewswire/ — Best-selling author of “Equity Value Enhancement (EVE): A Tool to Leverage Human and Financial Capital While Managing Risk” (Wiley Finance), Carl L. Sheeler, PhD, distills 25 years of working with top-tier owners and advisors to seven fundamental knowledge nuggets:

Vet your trusted advisors

Did your banker, attorney, accountant, wealth advisor and/or insurance professional help you get from “here to there”? It’s one thing to trust an advisor who you have worked with for years. Would you leave millions on the table, if they’re not helping you to get the best financial results? How do you know? Make the time for second opinions.

Manage spending habits

Many owners who cash in their sweat equity for cold hard cash must know what their after-tax proceeds will be; especially, if they’re partially financing a sale. Owners often achieve double-digit returns. A passive stock-bond portfolio will seldom exceed private company returns even for seasoned money managers. Either seek a higher sales price or develop a spending plan.

Define what success means

It’s rewarding to have created something from an inspiration and innovation, then to develop a team to lead and have a real measure of financial reward. The missed dates with family to achieve affluence can’t be undone. It’s essential to consider work-life balance, philanthropic involvement and how the next chapter in life will unfold.

Family and fun first

The cousin of #3 is to ensure your family understands the difficult decision to release the reins of a business whether to a third-party, key staff or family. There is no “right time” to start a business or to sell one, so consider how family views this decision and ask for insights and assistance in making the transition.

Making the kind of sacrifices few are able or willing to make when starting and growing a successful business takes fortitude.

Prepare and be realistic

Making the kind of sacrifices few are able or willing to make when starting and growing a successful business takes fortitude. It is rewarding as well as lonely. Try to maintain some humility. A business’ worth is based upon the level of risk and the economic benefit a new owner can expect to achieve as the business is. Invest in an independent opinion.

Avoid unnecessary taxes

Tax evasion is illegal. Tax avoidance is not. Invest in top-notch advice from a CPA and attorney on tax minimization/deferral business structure; allocation of intangible assets (goodwill, etc.); and other considerations ranging from weighing an asset versus equity sale and determining whether an Employee Stock Ownership Plan makes sense.

Work on the business

Owners are often so busy with the daily blocking and tackling, that any strategic plan with a two- to three-year window is often deferred again and again. Owners who want to double or triple their companies’ sales price need to know how to leverage their human and financial capital. That requires outside guidance. It’s the most overlooked consideration.

In addition to being a serial entrepreneur, Dr. Sheeler was awarded the 2016 Midmarket Thought Leader of the Year by the Alliance of Merger & Acquisition Advisors for his collaboration efforts to ensure owners and advisors alike achieve goal alignment and synergies. For owners wanting a holistic approach to tackling business growth and transition challenges, through River Edge Values Advisory Services (“REVAS”), Dr. Sheeler offers guidance and stewardship via call, in person or retreats at his scenic Durango-based farm.