Making New Year’s resolutions seems like a waste of time. Sure, we might start with the best of intentions, but by February most of us have quit the gym, returned to normal eating habits, and left books unread on our bedside tables.
But something I do believe in making at the start of the year are goals — both personally and professionally, short- and long-term. I keep in mind my limits and then set the goal to push past those limits.
So, what are some of your goals for 2024? I’d love to hear more about them… especially any that pertain to your Minneapolis business.
If you do go the resolutions route, one I think is worth anyone prioritizing in the new year: stop procrastinating. Procrastination is preventable with a little foresight and willpower.
And one thing you should not procrastinate on this year is filing your Beneficial Ownership Information report (BOI). Filing started as of yesterday. And while you have until the end of 2024 to get it finished, why wait? In the name of no more procrastinating, why not go ahead and knock this one off your list now while you’re thinking about it? (Note: BOI reporting doesn’t apply to every business. Reach out if you’re not sure you need to file a report. We can help.)
One other announcement to note…
If you filed an ERC claim in error and want to pay back money you received, the IRS has a new voluntary disclosure program for you. The program runs through March 22, 2024 (that only gives you a few months).
Even better news: Because the ERC mills charged a percentage fee, thus reducing the amount you received, the IRS has made provisions requiring only 80% of the claim be paid back. (Thanks, Uncle Sam.)
Now, now part one of this topic (which you can find in the blog archives) was about selling your business and some of the practical considerations that should play into decision-making. I’m here to pick up that subject again, this time addressing more of the financial elements, like taxes and business valuation.
It’s a complicated subject that won’t fit within the confines of a blog like this, but I want to cover some of the bases for you. If you want to talk more specifics, reach out and let’s talk more:
calendly.com/gmdaffin
So, let’s dive in…
A Business Valuation for Your Minneapolis Business
“Cheers to a new year and another chance for us to get it right.” ― Oprah Winfrey
If you’re considering selling your business this year, be prepared for the rigors involved both before and after the sale. This is no small endeavor, as you can imagine.
But the effort is worth it. A well-thought-out selling and pricing strategy not only attracts serious buyers but also ensures that you walk away with as much money in your pocket as possible. You’ve put too much work into this business to not take your time in this process.
We could tackle any number of topics related to a business sale, but today I want to address three: selling reasons, business valuation, and terms and conditions.
1. Sell for good reasons
Making the decision to sell your business is a big deal. There are a lot of things you have to take care of in the process. So, it’s essential to have good, well-thought-out reasons behind such a pivotal move.
- Lost passion – You’ve lost that excitement and drive to run your business, and it’s been that way for a year or more. This may be a sign that it’s time for a change.
- Reached your limit – Acknowledge when you’ve taken the business as far as you can or want to. Recognizing your limitations and understanding that new leadership might inject fresh perspectives and opportunities can be a valid reason to explore a sale.
- Future plans – If you look to your future and see things that don’t align with your current business—whether financial, vocational, entrepreneurial, or retirement-related—selling the business could be a strategic move to re-align your life.
- Succession planning – If you’ve planned for the succession of your business, whether passing it on to family members or selling to key employees, it ensures a smooth transition and can be part of a long-term strategy.
Before you sell, really think through your reasons. I *highly* recommend talking it out with a trusted advisor to help you decide if you’re forging ahead well.
2. Know how to price it
There are pages and pages that have been written about business valuation, which include the above-mentioned tax matters. There are various business valuation methods that can be used to determine the fair market value, such as income-based, asset-based, and market-based approaches, among others.
A good place to start here is compiling some basic information.
- Comparable Sales – Research recent sales of similar businesses in your industry and region to gain insights into market prices.
- Market Analysis – Take into account the current market conditions and economic trends that may affect your business’s value.
- Financial Statements – Prepare accurate and up-to-date financial statements that provide a clear picture of your business’s financial health. Buyers often scrutinize these documents.
- Competitive Analysis – Assess your business’s competitive strengths and weaknesses, which can influence its perceived value.
This data (and more) will all be needed to establish a business valuation, which can often be conducted by a third party. You’ll also want to factor in the costs to actually conduct the sale. The selling process can easily eat up 20-30 percent of funds from the sale.
3. Read the fine print
Once you’ve found a buyer and negotiated the terms of the sale, it’s crucial to pay attention to the details in the sale agreement. Ensure that the terms and conditions of the sale align with your expectations. This includes payment terms, seller financing details, and any contingencies. Review the sale contract thoroughly and seek legal counsel.
And understand that all of this takes time. According to data from the Exit Planning Institute, it takes an average of 6 to 12 months to sell a business. Be prepared for this timeframe and plan accordingly.
Selling your Minnesota business is a significant milestone, so if you’ve reached this point in your journey — congratulations! You’ve earned the rewards that come from staying the course, and we want to help you enjoy as many of them as possible.
Celebrating your success,
Grant Daffin