Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

January 13, 2015

A Business Sale without Tax Planning?

By Joseph Eneldas

selling-a-business

Ask ten potential business sellers what’s most important about selling their businesses and at least nine will answer, “Getting the highest price.” That’s not true, or at least shouldn’t be. Typically, finding an investor with a full price offer to buy a business is less challenging than finding a seller who can project the true cash proceeds of the sale. That’s because most business sellers tend to postpone their tax review until having received an offer. However, just like any other transaction, being unprepared and not knowing the closing cash beforehand will not motivate any seller to expedite a transaction; worse yet, the seller will “stall” while trying to assess the net proceeds and the buyer will lose interest in the transaction.

At A. Neumann & Associates, LLC, we often encounter business sellers looking more for the top line on their business sale, rather than at the net receipts of a transaction. As in business, higher sales revenues will not always lead to higher net receipts (or profitability). Simply put, a fair market sale price should be known to the business owner, but it’s only one component of the transaction. The owner also needs to consider the “actual” money they are achieving from the deal. To address both issues – understanding both the true market value and the net cash proceeds – a seller should use third party business valuations and proper tax planning.

A stunning number of owners don’t have any idea what their business is worth, let alone how much money will be in their hand at closing. What’s worse, they see the necessary advisory services to determine these numbers only as a cost item instead of a way to maximize the return on their business investment.

A common misconception is that a seller’s accountant or CFO will be able to perform these tasks cheaper and faster. However, a CPA can’t know the real value of a business – unless they are an accredited independent business valuation company. Furthermore, many accounting firms have been focusing for years on minimizing clients’ taxes each year. At the time of a transaction, however, their clients could have significant capital gains taxes due to depreciation recapture and other tax timing issues.

The only way to help a business owner to get a clear picture of the net receipts of a transaction is to perform an independent accredited business valuation, and then have a qualified tax planner work on a tax minimization strategy before the business is put up for sale. A strong M&A advisory firm will be able to sell a business at maximum value, plus ensure that the proper tax planning resources are employed to maximize the seller’s receipts.

In sum, a seller should use a qualified M&A advisory team to position a business for sale, and that team needs to include proper tax planning advice. With many baby boomers currently taking their companies to market in large numbers, many businesses will be available. This only makes it even more important to have a business properly prepared and to be ready for a deal when the opportunity arises.

About A Neumann & Associates, LLC

A Neumann & Associates, LLC is a professional mergers & acquisitions and business brokerage firm having assisted business owners and buyers in the business valuation and business transfer process through its affiliations for the past 30 years. With an A+ Better Business Bureau rating, the company has senior trusted professionals with a deep knowledge based in multiple field offices along the East Coast and has performed hundreds of business valuations in its history. The firm’s competitive transaction fees are based on successfully completing transactions. For more information, please contact A Neumann & Associates at 732-872-6777 or info@neumannassociates.com

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Client Testimonials

“I recently contacted A. Neumann and Associates about getting a valuation of my business done. I spoke with Marc, who explained the process in detail. After meeting with Marc in order to get a clear understanding of my business, and what I was hoping to accomplish. His patience in answering all my questions and his knowledge of the proper way to market my business gave me great confidence that this is the firm I will be using to sell my business for max value. Working with Marc at A Neumann & Associates was very easy and professional. I did not know all that was going to be involved in selling my business but they helped me through the process. What I thought was going to be a just another one of those pushy sales companies was just the opposite. Polite, knowledgeable, and a pleasure to talk to and deal with. I highly recommend this firm to anybody who wants to sell now or down the road. Marc not only knows his stuff, but actually is a real nice guy.”

Double Diamond

“Used A Neumann & Associates to sale my business. could not imagine having done it with out the patience and experience Gary provided. Thanks Gary,”

Dennis Frazier

“Working with Marc and his company was a pleasure. What I thought was going to be a just another one of those pushy sales companies was just the opposite. Polite, knowledgeable, and a pleasure to talk to and deal with. Marc handled most of the interaction and he has one of the greatest demeanors. Again, it was a pleasure working with him and his firm.”

Douglas DiCeglio

“I recently completed an acquisition using A Neumann & Associates. Tony Valentino was very helpful and accessible during the entire process. They do a thorough job vetting both parties and got us to the finish line.”

Srini Mudambi

“Claus out of Florida helped us with the sale of our business. We had never done anything like this and him and his team walked us through the process from start to finish. We had some challenges through the process and Claus continued to show up even in the difficult conversations.”

Colby Harris, Co-Owner, Del Mar Designs

“Claus Madsen thoroughly helped us with selling our company. From the 1st introductory meeting explaining to us what was possible, to providing us with resources to assist with the sale. Claus was invaluable throughout the whole sales process. Claus was with us every step of the journey and always made himself available for any questions or issues that came up along the way. If you are interested in selling your business, I encourage you to reach out to Claus and the ANA team so that they can let you know what’s achievable. These guys will make it happen!”

Ron Harris, Co-Owner and Vice President, Del Mar Designs

“A Neumann & Associates is the only business broker I would use or consult with. They have assisted with 3 business sales over the past 15 years with me. They are honest and sincere and have always performed better than my expectations. They are the only one i would use for the sales of my businesses.”

James Belanger, Business Owner

“I wanted to take a second to commend the exemplary customer service from both you [Karin Neumann] and Mr. Valentino. It’s both a rarity in the industry, and very much appreciated.”

Andrew G., Investor

“We worked with Neumann & Associates to investigate the purchase of a research company in 2010 and found Achim to be capable, forthright and realistic. His depth of experience enabled us to fully understand our options, offering creative options that might enable the acquisition. While we didn’t acquire that particular company at that time, we know exactly who to call whenever we’re looking to buy or sell a business.”

Daniel Coates, Buyer

“Purchasing a business through this firm was a pleasure. Gary was very professional and transparent throughout the entire process. I look forward to working with A Neumann & Associates in the future.”

William Klemens, Buyer
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Contact A Neumann & Associates, LLC

If you are considering selling your business, please contact us to learn more about our comprehensive service spectrum. Our experienced professionals will answer all your questions about selling a privately held business in complete confidentiality. Please fill out our contact form, or call us at 732-872-6777. We will contact you directly and will never identify ourselves to your employees.

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