The Years Before a Business Sale Matter More Than the Sale Itself
Many business owners describe their retirement plan in a single sentence: someday, the company will be sold.
The problem is that a sale gets treated as a single event, when the result depends on decisions made years earlier: how the company is organized, how much it relies on the owner, and whether anyone has worked out what the sale needs to pay for. By the time a buyer sends a letter of intent, much of that is hard to change.
Work Out the Number That Matters
Before asking what the business is worth, figure out what your family needs from it: the after-tax amount required to support your lifestyle and long-term plans once the business stops paying you.
That number shapes your options. An owner with enough outside the business can negotiate harder, accept a slower deal, or choose a buyer for reasons other than price. If there's a gap, the years before a sale are when you can close it by growing the business, saving outside it, or allowing more time.
Where the Price Goes
The headline price and the money that reaches your account are rarely the same. Consider a hypothetical sale announced at $30 million. If $6 million is an earnout tied to future results and 10% of the price is held in escrow, the owner receives $21 million at closing, before taxes and fees. The rest depends on how the business performs under someone else.
Structure matters too. Buyers often prefer to buy assets and sellers often prefer to sell shares, largely because the tax results differ. Two offers at similar prices can leave a family in very different positions, which is why your CPA and transaction attorney should be involved before terms are negotiated.
Some Planning Needs Years
The federal exclusion for qualified small business stock, expanded in 2025, is the clearest example. Shareholders in a qualifying C corporation may exclude a meaningful share of their gain from federal tax, with partial benefits after three years and the full benefit after five. Many businesses don't qualify, and the clock starts when the stock is issued, so it can't be arranged at the last minute.
Building a management team, cleaning up financial statements, and setting up a retirement plan work the same way. They pay off most when started early.
Estate and Charitable Planning Before the Price Is Set
Once a buyer puts a number on the business, that number is hard to argue with. Families planning to move shares to children or trusts often do it well before a deal, when the value may be lower. The $15 million per-person federal estate and gift tax exemption gives many families room, but appraisals and legal work take time.
Charitable gifts of shares need even more care. Done early, giving shares to charity before a sale can let the charity sell them without the owner owing tax on the gain. Done late, it fails. In a 2023 Tax Court case, an owner gave shares to charity two days before the purchase agreement was signed. The court found the sale was already virtually certain, treated the owner as the seller, and denied the deduction because the appraisal didn't meet IRS requirements.
Make the Business Less About You
Buyers pay more for a business that runs without its owner. If key customers, decisions, and know-how all sit with you, expect a lower price or more of it tied to an earnout. The fix is slow: develop managers, document how things work, spread customer relationships across the team, keep records that will survive a buyer's review, and give key employees a reason to stay through a sale.
Think About the Day After
On closing day, the family's largest asset becomes cash. That raises questions about investing it, keeping enough accessible, paying the tax, and replacing insurance and health coverage the company provided. It also raises a personal one: what fills the week once the business doesn't.
Most sales involve a banker or broker, a transaction attorney, a CPA, a valuation specialist, an estate attorney, and a wealth advisor. Owners get better results when those advisors are brought together early, with a clear picture of what the family needs the sale to accomplish.
Sources
Expanded qualified small business stock exclusion: Public Law 119-21, Sec. 70431
$15 million federal estate and gift tax exemption for 2026: IRS, 2026 tax inflation adjustments
2023 Tax Court case: Estate of Hoensheid v. Commissioner, T.C. Memo. 2023-34 (U.S. Tax Court, March 15, 2023)
The $30 million sale example is hypothetical and for illustration only.
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