Do you maximize taxable income before selling? Owen Nieberg breaks it down.

Owen emphasizes that around 80-85% of companies are not ready to go to market. Before deciding to sell, business owners need to understand the listing price and how it was determined, identify what they want in a buyer, understand the 6-12 month process timeline, and maintain business performance throughout.

Common Valuation Misconceptions:
A major misconception involves confusion between two different types of multiples - EBITDA and seller discretionary earnings - where business owners often apply the wrong multiple to the wrong number, leading to false valuations.

Preparation Recommendations:
Owen suggests several key preparation steps: building a strong management team so the owner isn't central to daily operations; maximizing taxable income in the final two years before sale rather than minimizing taxes, as every dollar increase in earnings typically translates to 2.5-3 times that amount in sale price; and maintaining clean, consistent bookkeeping records.

Killing Factors:
The biggest factor that derails transactions is loss of trust, often when sellers try to hide business issues rather than being transparent upfront. Owen shares an example where a $5 million deal nearly failed over a $50 discrepancy because trust was broken. Another major issue is using attorneys or bankers without M&A experience, which can kill deals through inexperienced contract negotiations.

If my team can help you answer questions leading up to your potential sale, please let me know.

Chuck Crumpton
StrategicAdvisoryForum.com