Making the Most of Uncertain Times
Most business owners agree that the economic uncertainty they had hoped would vanish is still with us and will remain so for the foreseeable future. So what are the implications for an owner who is interested in selling his or her business and retiring during the next 12 to 24 months?
Many owners focus on the top line of the transaction—the sale price. While it is always important to get the highest price possible for a business, it is not the only factor.
“The most important thing is not what you sell the business for, but how much of that selling price you get to keep after taxes,” says Achim Neumann, President of A Neumann & Associates, New Jersey. “An owner who properly structures the sale transaction to minimize the tax impact is often significantly better off than one who focuses only on the selling price.”
To that end, Neumann recommends implementing a team approach by including experienced bankers, lawyers, financial advisors and accountants to assist and design deal structures that meet your objectives. Neumann’s typical client has three separate uses for the proceeds from a sale: personal retirement income, charitable contributions, and providing for their children and grandchildren.
“With the proper deal structure, the value of proceeds available for all three purposes can be significantly enhanced,” points out Michael Gersten, the firm’s representative in Northern NJ and Southern NY State.
There are numerous vehicles for maximizing post-tax values of deal proceeds. For example, dynasty trusts can be used to make large financial gifts to multiple generations of family members while minimizing gift or estate taxes.
Which vehicles are right for you? It depends upon your objectives.
Setting up a donor advised fund, for example, can create a much larger charitable contribution than a simple gift. Each situation requires its own analysis and decisions.
The bottom line is that using these techniques can produce the same after-tax proceeds as if you’d sold the business for 40 percent more. Bottom line: The right strategy can save you a lot of dollars and headaches.
Neumann sums it all up: “Valuations provide sellers with an independent appraisal of their business so that it can be priced appropriately. Our assistance during the marketing phase ensures that transactions remain confidential and that only qualified buyers are presented to our sellers so their valuable time is not wasted. We make sure that there are no surprises during due diligence and that the closing is smooth. And finally, we make sure that our clients get to keep the maximum amount of the proceeds for the purposes they intend. It’s a win-win-win situation.”
About A Neumann & Associates, LLC
A Neumann & Associates, LLC is a professional mergers & acquisitions and business broker firm. They assist business owners and buyers in the business valuation and business transfer process. The company maintains its corporate offices in Atlantic Highlands, NJ and has seven field offices across the New York, New Jersey and Pennsylvania region. The company is the New Jersey representation of BBN, a firm with 450 offices and more than 25 years of experience – with access to thousands of qualified buyers and sellers throughout Canada and the U.S.
By Michael Gersten, Managing Director, Northern New Jersey and Southern NY State, A Neumann & Associates. For over 30 years Michael has helped business owners achieve their objectives. You can reach him at (201) 709.9237 or Michael.Gersten@NeumannAssociates.com.