Michael Levison

The Double-Dip Exit: How Rollover Equity Can Earn You More

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Rollover equity is a mechanism often used in mergers and acquisitions where a seller retains a portion of their ownership in the business after the sale. Instead of receiving the full purchase price in cash, the seller reinvests part of the proceeds into the newly structured entity, allowing them to participate in the company’s future growth and profitability. The approach is ideal for an owner that wants to take some chips off the table but also wants to stay involved and participate in future success. How Does Rollover Equity Work? To illustrate, consider this example: A business owner is selling their company to a private equity firm for $10 million. Rather than taking the entire payment in cash, they agree to roll over $3 million into equity in the new company formed by the buyer. This means they now own 30% of the restructured business. If the company grows and is sold again at a higher valuation, the seller shares in the upside. This approach creates a partnership dynamic between the seller and the buyer, where both parties are incentivized to maximize the business’s long-term value. Creating A Win-Win Rollover equity can benefit both sellers and buyers, as it aligns their goals and ensures shared success. Benefits and Risks Benefits Risks Tax Implications Rollover equity can also have significant tax benefits. By rolling over a portion of their equity, sellers may defer certain capital gains taxes. Instead of being taxed on the entire sale upfront, taxes on the rolled-over portion are typically deferred until the new ownership stake is sold in the future. However, the exact tax treatment varies by jurisdiction and should be carefully reviewed with tax advisors. Key Considerations for Sellers When deciding whether to roll over equity, sellers should evaluate: Rollover equity can be a powerful strategy for sellers who believe in their company’s growth potential and want to maintain a stake in its success. By understanding the benefits, risks, tax implications, and structuring considerations, you can make informed decisions and maximize the value of their transactions. Start By Knowing What You Really Need In A Sale Deciding whether to retain equity when selling your business, starts with knowing what you really need to net in the transaction to fund your desired lifestyle.  It is probably more than you think.  To properly calculate this number for your situation, take our Freedom Score assessment by clicking here.

Article - Why a competitive process is important

Why a Competitive Process Is Important When Selling Your Business

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When it comes to selling your business, one of the biggest mistakes you can make is going with the first buyer who comes along. Running a competitive sales process is crucial to maximizing your financial outcome and reducing risk. Here’s how and why it works. What Is a Competitive Sales Process? Simply coordinating inbound interest from buyers isn’t enough. A true competitive process means actively engaging multiple qualified buyers, assessing their ability to close, and leveraging their bids to achieve the best deal possible. A solid competitive process has several key elements: Why Competition Matters 1. Higher Valuation Through DemandJust like in any marketplace, more demand leads to higher prices. Consider this: We once worked with a software company that received initial offers ranging from 2x to 5x revenue. Only by creating competition did we get the best outcome. Actionable Tip: Don’t settle. Always test the market, even if a buyer promises a “quick and easy” deal. A higher bid might be just around the corner. 2. Better Transaction StructureBuyers often propose deferred payments or earnouts, where a portion of the price is paid later if certain targets are met. This setup is risky for sellers. Imagine being unable to make key business decisions because a buyer now controls the company’s direction and you carrying the risk of those decisions.  Having multiple competitive bids gives you leverage to negotiate the terms you want. Actionable Tip: Use competing bids to push for a clean cash deal or better terms. If one buyer insists on an earnout, another may offer a simpler structure. 3. Shorter TimelinesYou might think more buyers would slow the process, but it’s the opposite. Competition motivates buyers to act quickly. Without competition, a buyer may drag out diligence, waiting for you to feel pressured or tired of the process.  In a recent transaction, a strategic buyer tried to extend the diligence period, hoping to renegotiate terms later. Because we had a competitive process, we secured a faster deal with a more committed buyer. Actionable Tip: Set a clear timeline and stick to it. Ensure buyers know there are other parties involved and that delaying the process could cost them the deal. Avoiding Buyer Tactics That Reduce Your Leverage Buyers often try to control the timeline and terms by pushing you to sign an exclusivity agreement. This means you can’t talk to other buyers for 60-120 days while they conduct diligence. A prospective buyer benefits from this in a couple of ways:  Actionable Tip: Make buyers earn exclusivity. Limit exclusivity periods to 15-30 days, or even better, negotiate terms upfront before granting it. Minimizing Closing Risk If a buyer backs out late in the process, you lose time and momentum. This risk is particularly high with financial buyers who have multiple opportunities at any given time. Actionable Tip: Always have backup buyers. In one deal we managed, a financial buyer pulled out when their funding fell through. Because we had a second bidder lined up, we closed quickly with minimal disruption. Next Steps: How to Run a Competitive Process Running a competitive process can be a lot of work, but it’s worth it. Don’t leave money on the table—let the market show you what your business is truly worth. Ready to Take the Next Step? Spend 15 minutes completing our free online assessment of your business and we will provide you with a free report showing how your organization scores in each of the eight areas that drives enterprise value. Click here to get your free value builder score.

Podcast - TechSavvy Exit

Tax-Savvy Exits: Key Strategies to Boost Business Value and Avoid Costly Pitfalls

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In this episode of Growth & Exit Digest, host Mike Levison discusses the importance of proper tax strategies for increasing business value and facilitating a smooth exit. He emphasizes the importance of pre-sale tax planning to optimize business valuation and ensuring favorable tax outcomes. Mike then dives into the critical decision of choosing between asset and stock sales, using a case study to illustrate the potential implications on tax liability. He provides key insights on the use of installment sales, gifting shares, and timing the sale to coincide with favorable tax conditions. The podcast also covers the complexities of multi-state and international tax rules and the importance of post-sale strategy in managing capital gains taxes and reinvestment.

Thinking About Selling Your Business? Smart and Early Planning Can Make a BIG Difference

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When it comes to selling a business owners often overlook or underestimate the complexity of taxes involved, leading to unexpected liabilities. Implementing effective tax strategies not only reduces liabilities but also increases business value and ensures a smoother exit. Here are key considerations to help you plan effectively and increase profitability. 1. Prioritize Pre-Sale Planning Pre-sale tax planning is crucial for boosting business valuation and optimizing tax outcomes. Begin by reviewing your corporate structure, understanding the tax implications of asset vs. stock sales, and aligning family and estate planning goals with your exit strategy. For instance, transitioning a C-Corp to an S-Corp can reduce taxes by eliminating double taxation, but such changes should be made years before the sale to avoid unintended consequences. Action Step: Engage a tax advisor with M&A experience early in your exit planning process. They can recommend entity structures, set up tax-efficient retirement plans, or reorganize to qualify for lower capital gains rates. 2. Choose the Right Sale Structure: Stock vs. Asset Sale One of the most critical choices in a business sale is whether to pursue an asset sale or stock sale. Buyers often prefer asset sales for tax benefits and liability protections, while sellers typically favor stock sales to capitalize on lower capital gains tax rates. Understanding these options is essential to increase business value and minimize taxes. Case Study: A manufacturing business owner opted for an asset sale to attract a larger buyer. While this increased the sale price, it resulted in higher ordinary income taxes. Proactive planning could have enabled deferral of some taxes through installment sales or structuring a consulting agreement. 3. Utilize Installment Sales to Lower Tax Liability If structured effectively, installment sales allow you to spread income over several years, potentially lowering your overall tax burden. This strategy is particularly useful for high-value businesses, where receiving the full sale price in a single year could push you into a higher tax bracket. Action Step: Discuss with your tax advisor whether an installment sale aligns with your exit planning goals. This is especially valuable for businesses in industries with high-value transactions like specialized manufacturing or services. 4. Leverage Gifting Shares to Reduce Estate Taxes For business owners planning a family succession, gifting shares in advance can reduce estate taxes and facilitate a smoother transition. Gifting shares to children or establishing a family trust can lower the taxable value of your estate, saving on taxes in the long run. Common Pitfall: Failing to align estate planning with your tax strategy can result in a substantial tax bill even after selling your business. Address this early in the process. 5. Time Your Sale for Optimal Tax Rates Market conditions are important, but timing your sale to coincide with favorable capital gains tax rates or regulations can significantly increase your net proceeds. Stay informed about potential changes in tax laws to adjust your strategy accordingly. Action Step: Maintain flexibility in your timeline and consult with your advisor to monitor regulatory changes. This preparedness can make a big difference in post-tax profits. 6. Address Cross-Border and Multi-State Tax Issues If your business operates across multiple states or countries, planning for multi-state and international tax rules is critical to increasing business value. Different states may impose varying tax rates, and cross-border transactions can lead to complex federal and international tax regulations. Recommendation: Map out your business’s nexus and consult with a tax expert experienced in multi-state and cross-border taxation to avoid surprises that could impact your sale proceeds. 7. Develop a Post-Sale Strategy to Maximize Profits Managing capital gains taxes and reinvesting proceeds are vital steps after selling a business. Consider options like Opportunity Zone investments or 1031 exchanges to defer taxes and reinvest profits in new ventures or real estate. By following these strategies, you can maximize your profits, reduce your tax burden, and avoid common pitfalls. Smart tax planning not only enhances business valuation but also positions you for a more successful and profitable exit. Take the Next Step Spend 15 minutes completing our free online assessment of your business and we will provide you with a free report showing how your organization scores in each of the eight areas that drives enterprise value. Click here to complete the free value builder score assessment.

Maximizing Business Value: Onboarding Strategies To Boost Performance

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The episode of the Growth & Exit Digest podcast, hosted by Mike, focuses on onboarding strategies aimed at maximizing business value for small and medium enterprises. Mike emphasizes the importance of pre-boarding, stressing that preparing for a new recruit’s arrival and setting expectations can help foster engagement. He suggests integrating new hires by providing a structured first day, effective communication about the company’s mission and values, and comprehensive training. Mike further recommends a buddy system and goal setting to drive engagement and performance. He also highlights the significance of a positive work environment and regular feedback sessions. Mike points out that a good onboarding process can boost your business’s operational efficiency, retention rates, and overall valuation, thereby improving potential exit strategies.

Podcast - Onboarding Strategies

Onboarding Strategies to Boost Performance and Improve Retention

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In this episode of Growth & Exit Digest, Mike explores effective onboarding strategies to enhance a business’s value by improving employee performance and retention. He outlines crucial steps starting with pre-boarding, where employers engage future team members with welcome packets, through to continuous feedback gathering. Mike highlights the importance of a positive first day experience, clear communication of the company’s mission and values, and structured training. He advocates for mentorship programs, setting manageable goals, and fostering social integration as key strategies. The episode emphasizes collecting feedback for refining the onboarding process and points at these effective practices as essential for overall business success and boosting business valuation for a prospective sale.

Thinking of Selling Your Business? A well-planned and early plan can make a huge difference

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When it comes time to sell an enterprise, business owners usually do not realize or appreciate the complexity of taxation that are involved, which can lead to unexpected financial burdens. Implementing tax-efficient strategies will not only lower the risk of liability but also enhances the value of the business and helps ensure a smoother exit. Here are some important points that can help plan efficiently and boost your profit. 1. Prioritize Pre-Sale Planning Planning tax for pre-sales is vital to boost the value of your business and maximizing tax results. Start by examining your company structure, analyzing the tax consequences of assets as opposed to. stock sales and coordinating the goals of your family and estate planning to your plan for exit. In particular, the transition of an C-Corp into an S-Corp will lower taxes as it eliminates double taxation. However, these changes must be implemented before the time of sale to avoid any unintended effects. Act Step Find a tax consultant who has M&A expertise early in your plan to exit. They can suggest the use of entity structures, create retirement plans that are tax efficient or change the structure of your company to be eligible with lower capital gains tax rates. 2. Select the right sale structure Stock or. Asset Sale The most crucial decisions in a sale of a business is whether to opt for an asset sale or a stock sale. Most buyers opt for asset sales to gain tax benefits as well as liability protections, and sellers generally prefer selling their stock to benefit from lower tax rates on capital gains. Knowing these choices is crucial for maximizing the value of your business and reduce taxes. Example: The owner of a business that manufactures decided to make an asset auction to attract an even larger buyer. Although this increased the price of the sale but also led to more ordinary income tax. Planning ahead could have led to the deferral of certain taxes by installment sales or drafting an agreement for consulting. 3. Use Installment Sales to Reduce Tax Liability If they are properly planned the installment sales will let you spread your income over a period of time, possibly decreasing your tax burden overall. This method is especially beneficial for companies with high valuations, since receiving the full cost in one year can push you into a higher tax rate. Method of Action: Consult with your tax advisor if an installment sale is in line with your exit objectives. This is particularly beneficial for businesses operating in areas that involve significant value transactions, such as specialized manufacturing or providing services. 4. Make use of gifting shares to reduce Estate Taxes If you are a business owner contemplating a family succession gifting shares prior to the time of death will lower estate taxes and help facilitate the transition to a more smooth one. Giving shares to children or creating a family trust could reduce the tax deductible amount of the estate and save on taxes in the future. Common Mistake: Failing to align estate planning and tax strategy could result in an enormous tax bill after the sale of your business. Make sure to address this issue early in the process. 5. Plan Your Sales to be Timed for the Most Effective Tax Rates Market conditions are crucial however, making sure your sale is timed to coincide with tax-friendly capital gains rates or regulations could significantly increase the net profit. Keep yourself informed of changes to tax laws and adapt your plan accordingly. Actual Steps: Maintain flexibility in your timetable and work with your advisor for advice on navigating changes in the law. This preparation can be a major factor in post-tax profit. 6. Consider Taxes for Multi-State and Cross-Border Problems If your company operates in different countries or states planning for multi-state and international tax laws is crucial to increase the value of your business. Different states might have different tax rates and cross-border transactions could result in complicated tax rules for international and federal taxes. Recommendations: Plan out your company’s nexus, and talk to an expert in taxation who is experienced in cross-border and multi-state taxation to stay clear of surprises which could affect the proceeds of your sale. 7. Create a post-sale strategy to maximize profits Tax management for capital gains and reinvesting profits are crucial steps to take after selling a business. Look into options such as Opportunity Zone and 1031 exchanges to avoid taxes and reinvest profits in new ventures, or real property. If you follow these tips by following these strategies, you can increase your profits, lower the tax burden and avoid the common pitfalls. Tax planning that is smart will not only increase the value of your business but also allows you to have a better chance of achieving the most profitable and successful exit.

Thinking of selling your business? Effective and timely planning can Change the Game

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When selling an enterprise, business owners usually do not realize or appreciate the complexity of taxation associated, resulting in unexpected financial burdens. Effective tax planning will not only lower the risk of liability but also enhance the value of the business and facilitate an easier exit. Here are some important points that can help plan your tax strategy effectively and improve your profits. 1. Prioritize Pre-Sale Planning Planning tax for pre-sales is vital to boosting the value of your business and maximizing tax results. Start by examining your company structure, analyzing the tax consequences of assets as opposed to. stock sales, as well as aligning the goals of your family and estate planning to your plan for exit. In particular, the transition from a C-Corp into an S-Corp will lower taxes as it eliminates double taxation. However, such modifications should be done prior to the sale date in order to avoid any unintended effects. The Action Step Find a tax consultant who has M&A expertise at the beginning of your plan to exit. They may recommend entities, establish retirement plans that are tax efficient or even reorganize your business so that you can qualify to lower capital gain tax rates. 2. Select the best sale structure: Stock or asset sale. The most crucial decisions in the sale of a business is whether to opt for an asset sale or a stock sale. The majority of buyers prefer assets sales due to tax advantages as well as liability protections, and sellers usually prefer selling their stock to benefit from lower tax rates on capital gains. Knowing the options available is vital for maximizing the value of your business and reducing taxes. A Case Study An owner of a manufacturing company decided to make an asset auction to attract an even larger buyer. Even though this increased the price of the sale, however, it also resulted in more ordinary income tax. Planning ahead could have led to the deferral of certain taxes by installment sales or drafting an agreement for consulting. 3. Use Installment Sales to Reduce Tax Liability If they are properly planned, the installment sales will permit you to spread the cost of your sale over a period of time, possibly lessening your tax burden. This method is especially beneficial for businesses with high value, as getting the entire sale cost in one year could put you in a higher tax rate. The next step is to talk to your tax advisor if an installment sale fits with your exit objectives. This is particularly beneficial for companies in industries that have significant value transactions, such as specialized manufacturing or providing services. 4. Use Gifting Shares to Lower Estate Taxes Business owners who are planning a succession plan for their family gifting shares prior to the time of death will decrease estate taxes and aid in the transition to a more smooth one. Giving shares to children or creating a family trust will reduce the estate and save on taxes in the future. Common Error: Failing to align estate planning and tax strategy could lead to an enormous tax bill after the sale of your business. Be aware of this at the beginning of the process. 5. Schedule Your Sale to Get the Best Tax Rates Market conditions are crucial However, the timing of your sale to coincide with tax-friendly capital gains rates or regulations can dramatically boost your net profits. Be aware of any changes in tax law and modify your strategy accordingly. Actual Steps: Maintain flexibility in your schedule and work with your advisor on how to keep track of the regulatory developments. This can be a major factor in post-tax profit. 6. Examine Tax Issues involving Multi-State and cross-border Border Problems If your company operates in different countries or states, preparing for multi-state or international tax regulations is essential for maximizing the value of your business. Different states can impose different tax rates and cross-border transactions could result in complicated tax rules for international and federal taxes. Recommendations: Plan out your company’s nexus and talk to an experienced tax professional who has experience in taxation of cross-border and multi-state entities to stay clear of surprises that may impact the sale’s proceeds. 7. Create a post-sale strategy to maximize profits Tax management for capital gains and reinvesting the proceeds are essential steps to take after selling a business. Look into options such as Opportunity Zone and 1031 exchanges to avoid taxes and reinvest profits into new ventures or real property. If you follow these tips that you follow, you will be able to maximize your profits, lower the tax burden, and avoid common mistakes. A well-planned tax strategy will not only increase the value of your business but also help you prepare for an easier and more profitable exit.

Are you thinking about selling Your Business? A well-planned and early plan can make a huge difference

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When selling the business, owners tend to ignore or underestimate the tax implications that are involved, which can lead to unanticipated liabilities. Implementing tax-efficient strategies does not just reduce the burden of tax, but also boosts the value of your business and helps ensure a smoother exit. Here are some important points that can help plan your tax strategy effectively and improve your profits. 1. Prioritize Pre-Sale Planning Tax planning prior to sale is essential for increasing the value of your business and maximizing tax benefits. Begin by reviewing your corporation’s structure, analyzing the tax consequences of assets and. stock sales as well as aligning your estate and family planning goals in your exit plan. For example, converting from a C-Corp into an S-Corp could reduce taxes by removing double taxation. However, these changes must be implemented before the time of sale to avoid any unintended effects. The Action Step Employ a tax consultant who has M&A expertise early in your plan to exit. They can suggest entities, establish retirement plans that are tax efficient or change the structure of your company to be eligible to lower capital gain tax rates. 2. Select the right sale structure Stock or. Asset Sale A crucial decisions in a sale of a business is deciding whether to go with either an asset sale or a stock sale. The majority of buyers prefer assets sales due to tax advantages as well as liability protections, and sellers usually prefer stock sales to take advantage of lower tax rates on capital gains. Knowing the options available is vital to boost the value of your business and to minimize tax burdens. Example: An owner of a manufacturing company decided to conduct an asset auction to attract buyers with larger amounts. Although this increased the price of the sale but also led to increased ordinary income tax. Planning ahead could have led to the deferral of certain taxes by installment sales or drafting an agreement for consulting. 3. Make use of Installment Sales to reduce Tax Liability If properly structured the installment sales will permit you to spread the cost of your sale over time, potentially decreasing your tax burden overall. This is especially useful for businesses with high value, as getting the entire sale cost in one year could put you in a higher tax rate. Method of Action: Talk to your tax advisor if an installment sale is in line with your exit strategy objectives. This is particularly important for companies in industries that have high-value transactions such as manufacturing or service. 4. Use Gifting Shares to Lower Estate Taxes Business owners who are who are planning a succession plan for their family gifting shares prior to the time of death will lower estate taxes and help facilitate an easier transition. Giving shares to children or creating a family trust could reduce the tax deductible worth of an estate and save on taxes in the future. Common Error: Failing to align the estate planning process with your tax strategy could lead to an enormous tax bill after you have sold your business. Be aware of this at the beginning of the process. 5. Schedule Your Sale to Get the Best Tax Rates Market conditions are crucial however, the timing of your sale to coincide with tax-friendly capital gains rates or regulations can dramatically boost your net profits. Keep yourself informed of changes to tax laws and modify your strategy accordingly. The Action Plan: Maintain flexibility in your schedule and talk to your advisor on how to keep track of the regulatory developments. This can be a major factor in post-tax earnings. 6. Examine Tax Issues involving Multi-State and Cross Border Problems If your company operates in different countries or states planning for multi-state and international tax laws is crucial for maximizing the value of your business. Different states can impose different tax rates and cross-border transactions may result in complicated tax laws for both international and federal taxpayers. Recommendations: Plan out your company’s nexus, and talk to an expert in taxation who is experienced in cross-border and multi-state taxation to stay clear of surprises which could affect the sale’s proceeds. 7. Create a post-sale strategy to maximize profits Controlling capital gains tax and reinvesting profits are crucial actions after the sale of a company. Look into options such as Opportunity Zone and 1031 exchanges to avoid taxes and reinvest profits in new ventures, or real property. With these methods by following these strategies, you can increase your profits, lower the tax burden and avoid the common pitfalls. A well-planned tax strategy will not only increase the value of your business but also helps you prepare for the most profitable and successful exit.

Important Steps in Boosting Your Enterprise Value

Important Steps in Boosting Your Enterprise Value

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In the podcast episode, Mike Levison discusses crucial steps business owners can take to amplify the value of their businesses before selling. The podcast emphasizes the importance of planning 2-5 years ahead of the intended sell date to allow ample time for optimizing financial records and operational procedures, as well as identifying and implementing growth strategies. Mike advises polishing your financial data, augmenting operational efficiency, developing a strong management team, and posturing a convincing market position for your business – specifically focusing on unique selling propositions. He also underscores the importance of preparing meticulously for buyer due diligence to inspire buyer confidence. Through such strategic improvements and early planning, Mike conveys that businesses can substantially increase their sale price, attracting value-seeking buyers.