Taxes and Selling a Business: How to Calculate Net Proceeds

October 18, 2018

I continue my 3 part series on company valuation with a conversation with Ryan Turbes, the CPA manager for Boulay Accounting. The last episode we talked about certified valuations. Today’s episode focuses on how much you actually walk away with after a sale otherwise known as the net proceeds.

Ryan is a numbers guy and he tries to make today’s topic accessible to the audience. We discuss the standard process Ryan and his team follow and the various caveats that pop up from time to time. He has worked both sides of the deal structure. so he shares what both the seller and the buyer are looking for during a negotiation.

Net proceeds are a tedious journey and nobody gets their money upfront. However, Ryan can help you get a realistic picture of what to expect from your sale.

What you will learn:

  • Why Ryan chose to be an accountant.
  • How the buy-side and sell-side differ.
  • Why you need a transitional CPA for a business sale.
  • What is EBITDA?
  • The steps Ryan and his team follow in the early stages of negotiation.
  • What is an add-back?
  • When should you make changes to your business?
  • How working capital affects the process.
  • When not to use a 12-month revenue measurement.
  • How to prepare for the net proceeds process.
  • The variables that affect the deal structure.
  • Why buyers want an asset deal.
  • Why sellers want a stock deal.
  • When to use a 338-H10.
  • What is a waterfall?
  • How installment payment agreements work.
  • How earn-out agreements work.
  • How employment agreements work.
  • The importance of a good negotiation team and attorneys.
  • The importance of a 1031 exchange.
  • How the 2017 tax law changes have changed the sale process.
  • Why you need to start planning early.

Takeaway:

The first thing you need to consider when planning to sell is how much money you will need in retirement. If you haven’t listened to my interview with Brandon Wood about lifetime cash flow, then check that out before you start.

You’ll find more information on business value in my previous interview with Brandon Hall. Ask yourself what your business needs to be worth and take steps to get to that goal.

There are a number of tools that can help you at least begin the important net proceeds conversation. You’ll find those resources on GEXP’s website.

Tune in for my last installment of this series with John Warlow to get the full benefit of today’s episode.

Links & Resources

GEXP Collaborative
Boulay Group
Ryan’s email
Ryan’s direct line – 952-841-3104
Basic Waterfall & Net Cash Proceeds

About Ryan:

Ryan is a manager at Boulay and is one of the leaders in the firm’s transaction advisory services practice. In addition to working with transaction services, he specializes in attest, tax, consulting and accounting services for clients in a wide variety of industries including construction, professional services, manufacturing, and insurance agencies.

Ryan is proactive in helping his clients with their accounting needs and leads attest and transaction engagements. He prides himself on providing cost-efficient and practical solutions to his clients. He presents creative ways to help clients achieve their goals and make the right decisions.

Boulay works with individuals, closely-helps businesses and publicly traded companies who are, or who aspire to be financially successful. Its focus is to protect its clients’ businesses, build their wealth and secure their future by partnering with them and integrating its depth of experience in accounting, tax and financial consulting services designed to “help them get there.”

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