Baby Boomers are selling their businesses in record numbers. In fact, six out of 10 business owners plan on cashing out within the next 10 years.
Yet, according to the valuation research firm IBIS, 98% of business owners do not know the value of their company, and few owners take the necessary planning steps to increase their after-tax profits from the sale. Taxes are apportioned among the asset classes . Assets held in the short term, like inventory, are taxed at higher ordinary tax rates. Assets held long-term are taxed at lower capital gains rates. Part of your negotiation will be to allocate the sales price to assets taxed at a lower rate.
If your company is larger, your buyer will likely be purchasing your company as an investment. The buyer is seeking the best possible return with the least risk. An investor will probably have a firm number in mind for the purchase price. If the terms are not agreeable, they will invest elsewhere.