Most business owners we meet have done something that makes perfect sense and quietly creates a retirement problem. Every “good” year, they put money back into their business: new equipment, another hire, more inventory, a new location. The 401(k) gets whatever is left, and that often isn’t much, because the business has always paid a better return than anything else they could buy.  

So, when business owners come to see us closer to their retirement age, the biggest number on their balance sheet is often the business, not the 401(k). That would make selling their business the largest financial event of most business owners’ lives, and most of them start their business exit planning far too late.  

We sat down with Van Daughtry, a business broker based here in Raleigh who works with business owners across the Carolinas and Virginia, to get a straight answer on timing. His short answer was that planning starts the day you buy or start the business, but at a bare minimum you want 2 to 3 years between your first serious conversation and your target sale date. 

Here’s what fills those years, what buyers look at, and the part of the sale that will end up on your retirement balance sheet. 

The short answer: two to three years, minimum 

Van said almost every advisor he knows gives the same answer, which is the sooner the better. Then he gave a bare minimum. If he can talk with a business owner 2 to 3 years before their target sale date, there’s time to review the financials, identify likely buyers, and make improvements that raise the value. He often brings in business coaches to tighten operations, and the owner then needs time for those changes to show up in the results a buyer will examine. 

A buyer pays for results your books already show, and improvements need a year or two of numbers behind it before it counts. So, 2 to 3 years before is the minimum. 

Van was also clear that life doesn’t always cooperate. A health scare or a shift in the market can move the date up, and he meets owners where they are when that happens. Those owners sell the business as it stands on that day. Planning early is how you keep the timing yours. 

Two kinds of ready 

Murs asked Van what it means to be ready to sell, and Van split it into two criteria. The business has to be ready, and the owner has to be ready. You can have one without the other, he said, and you won’t get the best result unless you have both. 

In our experience, owner readiness is the one that’s lacking. If you’ve run a company for 10, 20, or 30 years, walking away from it is a big emotional event. Van asks business owners a pointed question before any sale: what are you going to do afterward? When people say golf or fishing, he tells them that works for the first couple of months, but someone who has been going 100 miles an hour for decades usually needs more than that. He wants owners to play out those scenarios, so they know what to expect after the transition. 

Business owner readiness also includes their financial plan. You need to know whether the after-tax proceeds from the sale can fund the retirement you want, and that’s a separate question from what the business is worth.  

What buyers look at when you’re preparing to sell a business 

On the business side, Van’s list starts with the books. A buyer wants financials that are easy to read and easy to interpret, and he puts the minimum at three years of corporate tax returns, profit and loss statements, and balance sheets. Those records need to show real profitability. If the business has paid for personal expenses over the years, which Van described as treating the business like a personal piggy bank, the profit looks smaller than it is and the price follows it down. 

The second item is a business valuation. Van sees the valuation as the thing that level-sets expectations. Many owners carry a number in their head, either what they believe the business is worth or what they believe they need to retire. A valuation built on comparable sales of similar businesses replaces that number with market data. It also tells business owners whether a lender will lend on the business at that value. Buyers often finance part of the purchase, so a price a bank won’t support is a price that won’t close. 

Some of this process is like selling a house. You wouldn’t list a home without knowing the comps and having your paperwork in order. A business works the same way, with far more paperwork and far more money on the line. 

What the sale looks like once you go to market 

Van had a memorable line. If it took you 30 years to build the business to where it is, you can’t expect to unwind or transition it in 30 days. A well-run sale takes months. 

Here’s how he described the process. The broker builds a marketing package called a Confidential Information Memorandum, or CIM, that pulls your financials and your story together, and a potential buyer sees it only after signing a non-disclosure agreement. The broker then vets buyers on their financial strength, their level of interest, and their background in your industry. Van described his role as carrying a fiduciary responsibility to the seller, so his job is to bring forward the strongest buyer candidates. 

He also pointed out that many buyers come in without their own representation. In those cases, a broker may connect the buyer with a Small Business Administrator (SBA) lender, a Mergers & Acquisitions (M&A) attorney, or a Certified Public Accountant (CPA) for due diligence, without sharing anything private about the seller, so the deal keeps moving toward closing. 

And he stressed confidentiality. Most owners don’t want competitors or employees to hear about a sale before it’s done, and Van said his firm treats that as a priority from the very first meeting. 

The number at the top isn’t the number you keep 

This is where our part of the work as a holistic retirement financial planning firm begins. Say a business sells for $1 million, $5 million, or $10 million. That headline price can feel like a lot of money, and none of those figures land in your account in full. There’s lots to consider; like taxes, deal costs, how the money comes in (as a lump sum or spread over time), and potential changes when the tax bill arrives. 

Brokers want to recognize the issue, he said, but they don’t want to be the one-stop shop. Van said he walks clients through those scenarios because he doesn’t want anyone to regret the sale afterward, and then he hands them off. A team like ours gets started at this point. 

When a business owner brings us a potential sale, we’re aiming to address 3 questions: 

1. What do you keep? We model the tax on the sale itself under different deal structures with Taylor Wolverton, our Director of Financial Planning and Tax Strategy, so you see a realistic after-tax figure before you sign anything. 

2. What does that money have to do? For many business owners, the sale proceeds replace the business as the source of their paycheck. We build the retirement income plan around that money and stress-test how long it can carry you. 

3. What else will the sale change? A sale year is usually a high-income year, which can open or close certain tax and charitable planning opportunities. If the business has been paying for your health insurance, that coverage needs a replacement, which is where Shawn Southard, our health insurance and Medicare specialist, comes in. And your estate plan may need an update, because it probably still describes an ownership stake that’s about to become cash. 

Because we plan the taxes and file them in-house, the strategy and the return come from the same team. Everything we model is a projection built on your numbers, and it changes as the deal terms change, which is exactly why we want to see those numbers early. 

Build your exit team before you need it 

Van’s first piece of advice was to have trusted advisors in your corner well before any sale. His list: 

• A business attorney to make sure your operating agreements and buy-sell agreements are in place 

• The correct commercial insurance for the business 

• A CPA or fractional CFO to keep the financials clean and readable 

• A wealth advisor to plan what happens to the money and to your retirement 

• A business broker who can speak to value, likely buyers, and timeline 

That last one is Van’s soapbox. Brokers usually get called at the end, when the owner is tired or burned out. He would rather have a seat at the table years earlier, alongside your attorney, CPA, and wealth team, so he can help shape the value before it gets priced. 

He also wants owners to know that an outright sale is one of several ways out. An Employee Stock Ownership Plan, a transfer to a family member, or a sale to an employee may fit better, and each one changes your business succession planning, your taxes, and your retirement income in a different way. 

A business owner’s transition checklist 

If you plan to sell your business in the next several years, here are some action items we covered with Van to start that transition: 

1. 3 or more years out: Gather three years of clean tax returns, P&Ls, and balance sheets. Stop running personal expenses through the business. Review your operating and buy-sell agreements with your attorney. 

2. 2 to 3 years out: Get a valuation. Have a first conversation with a broker about likely buyers. Sit down with a planning team to model what the after-tax proceeds can support in retirement. 

3. The year of the sale: Coordinate the deal structure with your tax strategy before you sign, and line up health coverage if the business has been providing it. 

4. The year after: Put the income plan to work, update your estate documents, and give yourself something worth getting up for on a Tuesday morning. 

Your retirement 

You’ve spent decades building something a buyer will want. A few hours now with your broker, your CPA, your attorney, and your financial planning team all looking at the same numbers, can help decide how much of that value you keep and how comfortably you live on it once the business belongs to someone else. If you’re thinking about selling in the next few years, or you just want to know what your business means for your retirement, reach out through the Contact Us page at pomwealth.net and we’ll start by looking at your numbers with you.  

This material is for informational and educational purposes only and is not intended as investment, legal, or tax advice. Van Daughtry is an independent third-party guest speaker and is not affiliated with POM Investment Strategies, LLC dba Peace of Mind Wealth Management (POM), a registered investment advisor. The views expressed are those of the speaker and do not necessarily reflect the views of POM. Consult your financial professional regarding your individual situation.