Selling your business may be the most significant financial transaction of your life. Whether you’ve spent decades building it from the ground up or recently scaled it for rapid growth, the decision to sell comes with both opportunity and complexity.
Proper preparation can mean the difference between a smooth, lucrative sale and a deal riddled with surprises, delays, and unnecessary taxes. While many owners focus on finding a buyer and negotiating the purchase price, the real value is often won or lost in the planning phase - well before you go to market.
This article kicks off a ten-part series on mergers and acquisitions (M&A) from a seller’s perspective, with a focus on tax planning and positioning your company for maximum after-tax proceeds. Over the coming weeks, we’ll explore the steps every business owner should take to prepare, the common pitfalls to avoid, and the tax strategies to help you keep more of what you’ve earned.
The current M&A market remains strong in specific sectors, with private equity firms, strategic buyers, and family offices actively seeking quality companies. Hot industries - such as technology, healthcare, and specialized manufacturing - command higher multiples than ever.
However, valuation trends can shift quickly. Economic conditions, interest rates, and regulatory changes all influence buyer demand. This means sellers need to consider when to exit carefully. Waiting too long could mean missing peak valuation, while rushing into a sale without preparation could reduce the final proceeds and increase tax liability.
Tax timing plays an equally important role. For example:
Implementing advanced tax strategies can significantly enhance the after-tax proceeds of your business sale. Some of these strategies include earnouts, installment sales, stock rollovers, charitable trusts, and Qualified Small Business Stock (QSBS) exclusions. Each of these strategies has its own set of benefits and timing considerations. For instance, installment sales allow you to spread the income over several years, potentially lowering your tax bracket in each of those years.
Additionally, structuring the deal to minimize taxes at both the business and personal levels is crucial. This often involves complex tax planning and should be done in consultation with a CPA or tax advisor experienced in mergers and acquisitions.
Preparing for a business sale should begin 12–24 months before you plan to go to market. A comprehensive pre-sale checklist can help ensure that your business is in the best possible shape to attract buyers and command a high valuation. Key steps in this checklist include:
Early planning not only boosts valuation but also minimizes surprises during due diligence, making the sale process smoother and more efficient.
Sell-side due diligence is an internal process where you identify and address potential issues before listing your company. By conducting sell-side due diligence proactively, you maintain control over the process and prevent last-minute deal breakers. Common areas of concern include payroll tax errors, improper nexus registration, and misclassified workers. Addressing these issues upfront strengthens your position in negotiations and builds buyer confidence.
Even when a buyer is interested, deals often stumble over challenges that could have been addressed earlier. Some common deal challenges include:
By anticipating these challenges and preparing in advance, you can maintain control of the process and avoid last-minute negotiations that reduce value.
For a more detailed guide on preparing for a business sale, check out our comprehensive series on mergers and acquisitions:
By taking a proactive approach to strategic tax planning, you can position your company for a smoother transaction, a higher valuation, and a more favorable after-tax outcome.