A vast number of baby boomer business owners will be retiring within the next eleven years. Unfortunately, most will not be properly prepared to sell their business for the best and highest price. In fact, some will not be able to sell their business at all. This impending tragedy can be averted if the owners know what to do--and how to do it.
It has been said that business buyers purchase future cash flows. While that is correct in theory, there is really much more to the story. Individual business purchasers are really purchasing a "dream" that is owned by the seller.
The purchaser really expects to buy:
In reality, business owners have no clue as to how to fulfill the buyer's expectations. That's because business owners normally don't think in terms of "the value" of their businesses. Rather, they think in terms of "the bottom line." The bottom line is only one side of the coin. The other side of the coin is value.
Value can be defined as "the amount of money in cash equivalents, that a buyer will pay you to willingly part with your business."
The most important part of value deals with the potential buyer's perception of the worth of your business. As with many things, perception IS reality. What perception would an investor (purchaser) have of YOUR business?
Perceptions of businesses are often fogged by Tax-Saving "mania" that grips business owners. Some business owners believe that the most important thing in business is--TO AVOID TAXES. Many small businesses even keep their books on the "income tax basis" of accounting. When this happens, profits from the business may look very low--adversely impacting a potential buyer's perception of value associated with the business.
While the business owner has saved income taxes--without proper long term strategies and tactics to offset the implied damage caused by low profits--the business owner will actually suffer financial loss due to decreased business value.
I do not advocate paying more income tax than is legally necessary. However, without effective "counter measures" to offset the numerous "tax advantages" enjoyed by the business--business value can suffer terribly. And this is a terrible "curse" when it comes time to sell a business.
Some business owners understand that they should "do things differently" a few years before they plan to sell. These owners think that they "have time" before they need to get their business ready for sale. The truth is, that we all live on borrowed time. Life events such as divorce, disability and death (the three BIG D's) may find business owners caught with their pants down, regarding the salability and values of their businesses.
So, how does one go about saving income taxes while making (and keeping) a business valuable and marketable?
Here are a few suggestions:
Grover Rutter is a CPA and Business Broker who has been dealing with closely held businesses for over 30 years. "Now that the baby boom generation is maturing, the business advice they receive has to be much different from 10 to 20 years ago," Rutter explains.
For this reason, Grover has written a newly released book that provides "straight talk" to business owners so they can learn very quickly HOW to increase and maintain their business values. This book provides an excellent "self examination" for business owners to apply to their own business situations. Your Business IS Your Goldmine! (Learn How to Get the MOST Out of Your Business) delivers an important message that most business owners NEVER hear! HOW TO GET THE MOST FROM YOUR BUSINESS! This powerful (and easy to use) message will help business owners put their business financial well-being into perspective. The tax deductible Guide is less than $20, and should be read by every business owner. Interested readers may find the guide atwww.Lulu.com/businessadvisor