Making Cents: How do you know when it is time to sell your business?

US Wealth Napolitano |

By: John P. Napolitano, CFP®, CPA, PFS, MST

If there’s one big mistake that business owners make, it’s failing to exit their business on their terms and within a proper time frame. Simply put, too many owners stay in the saddle too long and miss the opportunities to time their exit well. They miss it for a myriad of reasons. Some don’t make it to the finish line due to disability or death and others simply don’t do the planning needed for a smooth exit.

Let’s start would be the definition of a smooth exit. A smooth exit is one where all of your stake holders; partners, customers, employees and your family, feel that they were treated well. This doesn’t usually happen by accident, it requires planning and communication that may take up to 5 years to implement.

First, is devising a strategy for your unplanned exit such as your permanent disability or death. This requires an understanding of who does what today and specifically who will replace you when you can’t show up for work. Many owners get needlessly hung up on this for too long. I know that you have hard decisions to make, but you must plan ASAP for the possibility that your number comes up tomorrow.

Outline this plan on paper, then start talking to those who would be in line to replace you. There may be several people in this conversation. Your key employees must understand their possible roles. Your customers should know that you’ve got them covered for the ultimate contingency. Don’t be shocked if they appreciate you more for letting them know that you care that much for them. Your other partners and family need to know the plan so they can act accordingly for the benefit of the new owners, especially if a part of the plan is to then sell the business.

Once you’ve mapped your contingency plan out, start thinking about a more planned exit on your terms. It’s hard to say when it’s the right time to sell. It could be a combination of your savings outside the business, the value of the business and the market conditions for the type of business you own.

Begin by understanding the value of your business. I’d ask a formal business appraisal company to do this. You may ask a mergers and acquisition firm for an opinion of value also, but their primary business is to sell your business for a contingent sales commission. In either case, hire someone that can help you map out what you may need to do in order to maximize your value at some future point.

Enter that conversation knowing what you need to get from your business in order to live the lifestyle you envisioned. This simple exercise gets complicated when you factor in the tax consequences and the other moving parts of your financial and family plan. Hire an advisor who has the intellectual capacity and firm resources to oversee this entire process.


John P. Napolitano CFP®, CPA is CEO of US Wealth Management in Braintree, MA. Visit JohnPNapolitano on LinkedIn or The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. John Napolitano is a registered principal with and securities offered through LPL Financial, Member FINRA/ SIPC. Investment advice offered through US Financial Advisors, a Registered Investment Advisor. US Financial Advisors and US Wealth Management are separate entities from LPL Financial. He can be reached at 781-849-9200.