We talked about the importance of determining your departure objectives as a first step to leaving your business under most favorable conditions. One of the goals outlined was deciding to whom you will transfer the business: children or family members; key employees; co-owners; or a third party known or unknown.

It is important to appreciate the methods of business valuation and the need to place a high or low valuation on your business depending on what type of buyer you have targeted as the new owner. If you want to sell to a buyer outside the company, you will want to establish as high a valuation as possible to maximize what you get. If you prefer to sell or transfer ownership to an “insider” (key employee, co-owner, or family member), you may want to establish as low a valuation as possible to minimize what the IRS takes.

We’ll discuss each type of buyer and the pros and cons of each in a future post. Remember, its important to value the business early in the planning process so you will have time implement tactics to increase (or decrease) the valuation to best meet your needs given the type of successor you have selected.

Tags: business successor, Business Valuation, departure objectives, exit your business, minimize taxes, sale of your business, value of your business