San Diego Business Owners: Get Started Early to Plan Your Exit

By Steven DeMatteo, Financial Advisor at UBS Wealth Management USA 
 
Successfully selling one’s business requires a combination of skill, timing and patience. Owners who are ready to move on must make hard decisions on whether it is the right time to sell or to hold on until circumstances change. 
 
The current environment is not especially favorable for those looking to sell due to the volatile state of the economy and continuing Fed rate hikes, which exert pressure on middle-market M&As. This may create anxiety for those in the position to exit or those who did not take advantage of more favorable recent conditions. 
 
To understand the current state of affairs for owners looking to sell, UBS conducted a survey of over 500 U.S. business owners in 2023. Owners selected for the survey either were looking to sell their business in the next five years or had recently sold a business. 


Here’s what we learned: 

• 40% of respondents expressed remorse that they didn’t sell earlier during periods of higher valuation
• 61% held serious concerns that they will ultimately receive an improper or lower business valuation when they do sell 
• Many owners were not making the essential preparations on an appropriate time scale to prepare their businesses for the best possible deal 
• Not enough owners were engaging financial advisors to help them, not only with the sale, but also with the considerations that come after the fact.

 
Considerations given current market conditions 
While owners cannot control market conditions, they can prepare early for an eventual opportunity that could come along later. Those looking to sell can learn from the mistakes of those who recently exited. 
 
Our survey found 73% of business owners who sold their companies in recent years spent less than two years preparing for an exit (32% of those spent less than a year) and an astounding 80% wished they had started preparations earlier. We recommend owners engage with financial planners several years in advance to ensure they and their families are ready for a sale. 
 
The survey found that only two-thirds of business owners who were looking to exit their businesses turned to financial advisors for advice. Preparing to sell one’s business is not just about the actual exit; there are just as important decisions that come after the fact, such as having a concrete plan for the proceeds, which includes smart tax strategy and estate planning. 
 
Only 40% or less of respondents have engaged in or contemplated incredibly important decisions such as discussing family wealth with their heirs, creating an estate plan, or establishing a concrete plan for what to do with the proceeds. Financial advisors play a vital role in helping business owners prepare for exits, including these key issues beyond the close of the sale. 
 
Start early
Selling one’s business in times like these is somewhat like the stock market during a bear run. Those who can manage to keep running their business until times improve should strongly consider it. But the planning for that eventuality should start as soon as possible. 
 
Fortunately, the solution to these challenges is simple: working with the right financial advisor can help with the litany of needs a business owner must take into account. This includes post-sale spending and investing needs, financial planning, garnering the needed support of family and friends, and making sure the owner’s legacy is maintained to their satisfaction. 
 
The M&A market isn’t a monolith. While the overall market may be challenging, the right buyer for any one business may be right around the corner. Every owner looking to exit needs to be ready because good businesses will find the right buyers when the time is right. 
 
Things may be looking up. There are positive signs amid the uncertainty: a fifth consecutive month of $200 billion in M&A volume and 70% of M&A buyers were corporate, which creates more volume than private equity buyers. Regardless of the circumstances of today’s markets, business owners should begin carefully planning their exit today to ensure they are ready when conditions are ripe. 
 
A trusted financial advisor has often seen it all and can help you prepare for both the financial and emotional outcomes of selling your business. It’s a big step that can leave even the most level-headed executive unsure of what to do next. Ensuring that a financial expert is part of your team of advisors at the right time will set up your family well for the years ahead. 
 
Steven DeMatteo is a Financial Advisor with Torrey Pines Wealth Management, a UBS signature team. Together with his team, Steven draws on broad experience in the wealth management industry to help clients exit their companies, develop retirement plans, and preserve wealth for future generations. He has earned the Wealth Advisor and Certified Exit Planning Advisor (CEPA) designations, is a member of the esteemed UBS President's Council and was a 2018 recipient of the UBS Aspire Award for collaboration, leadership and service.  Steve is also a retired Marine Corps helicopter pilot where he was decorated for performance in peacetime, humanitarian and combat operations. 
 
 
This article has been written and provided by UBS Financial Services Inc. for use by its Financial Advisors. 
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