Shoot the Moon Podcast Summaries – 6 Things Business Owners Need to Know BEFORE an M&A Process

Shoot the Moon Podcast Summaries – 6 Things Business Owners Need to Know BEFORE an M&A Process

Revenue Rocket’s Shoot the Moon Podcast is a valuable resource for IT services leaders considering an exit. This blog captures several concepts outlined throughout our podcast, focusing on selling your firm.


1. Get the whole team … and the right team … together from the beginning: For most business owners, forming a team begins with the right lawyers (M&A and Trust / Tax) and a qualified accountant; ideally with intimate knowledge of both your business and personal finances. More importantly, you need a single point of contact to bring it all together. That can be an advisor or firm with deep experience in helping business owners through the process and who can run point on the high volume of steps that must be taken before, during and after a combination. If the right team is not in place and well managed, if you only work with your M&A attorney, for example, your accountant will certainly come to you after the deal is done and point out what would have been more advantageous after the fact. These missed opportunities cost sellers a ton of money and often lead to costly tax issues down the road. Get the right team in place![/vc_column_text]

2. Utilize your estate tax/gifting exemption while you can: If you are considering selling your business in the next few years, now may be the time to make the most of estate tax/gifting exemptions by transferring company stock and other assets to loved ones. The current exemption amounts ($12.06 million for individuals and $24.12 million for married couples in 2022) are set to sunset at the end of 2025!  Private business owners have the advantage of being able to utilize leverage on their gifting because they are dealing with private company stock. This strategy can get complicated, so work closely with a qualified advisor to ensure it is done correctly.

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3. Understand what potential buyers are interested in, and if those interests include your business and its offerings. When you’re selling a tech-enabled services firm, it’s important to understand what potential buyers are looking for. Are they interested in the technology itself, the customer base, or the team? Knowing what buyers are interested in will help you package and sell your firm in the most appealing way possible. We have a few podcast episodes surrounding this topic, check them out for more on this:

  • Episode 145: Why Sellers with Vertical Market Approaches Earn Premium Valuations. Listen now>>
  • Episode 142: Picking and Winning a Vertical Market with Guest Dennis Dimka from Uptime Legal. Listen now >>
  • Episode 110: Identifying the Ideal Suitor. Listen now >>
  • Episode 126: Verticalization: Why you should be an Expert in your Market. Listen now >>
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4. Make the most of your company structure: How your company is structured can have an enormous impact on the outcome of a sale. For example, if you own C-corp stock, you might qualify for a Section 1202 exclusion, also called the Small Business Stock Gains Exclusion, which could mean eliminating up to $10 million in capital gains tax from the sale of a business. Further, if you’ve given stock to family members via a trust transfer, each individual trust could qualify for the exclusion. The point is to fully understand the legal entity of your company and the potential benefits it can provide as you approach a sale.

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5. Don’t involve employees to early: Make sure you bring certain leadership into the loop regarding your exit plans at the right time.. But not too early. When do you inform leadership? When do you tell your entire organization? If some people are kept in the dark as to your plans, it can be damaging for morale but you also don’t want the wrong people in the loop. Eventually, you’ll want to reward your team and get them excited about what’s happening. Any potential suitor will want that as well, and it can derail a sale if key staff leave or are disincentivized. So, bring your team into the conversation when the time is right and give them an incentive to be all in. We have lots of insights on employee involvement during an M&A process, check out our podcast:

  • Episode 140: Informing your Team of your Decision to Sell. Listen now >>
  • Episode 136: CEO and Leadership Transitions When Selling your IT services firm. Listen now >>
  • Episode 32: Employee Involvement during the Sale of your Business. Listen now >>

6. Don’t wait for the absolute perfect opportunity to sell: If your business is growing and you believe that it will continue indefinitely, that’s great. Know you are in the driver’s seat and well positioned. Just don’t let that trajectory lull you into inaction. By that we mean there is never a perfect time to sell. If you continually wait for your company to be just a little more profitable, to grow a little more, you’ll never sell. Pull the trigger when it feels right for you and your team. Look beyond the monetary value of the business and the proceeds to come your way and weigh your time horizon to enjoy the fruits of your labor and achieve a greater purpose. If you only focus on maximizing the last dollar, you will eventually be disappointed. What do you want the proceeds of the sale to do for you, your family, your team? Let that be what guides why, and when, you sell.

Would you rather listen then read? Check out our Shoot the Moon Podcast Seller’s Playlist.