Latest from Contracting Business Success

Silver Bullet Price Page Inc.
Photo 20169909 © Vladischern | Dreamstime.com
Photo 47091378 © Vvoevale Dreamstime.com
ID 115236686 © Cineberg Ug | Dreamstime.com
Boonyakiat Chaloemchavalid / iStock / GettyImages
Photo 122906633 © Vaeenma | Dreamstime.com
Business Sale Dreamstime L 122906633 644accf4293da

What to Expect When You Sell Your Business

April 27, 2023
Some of these realities may shock you, but they apply in varying degrees based on size of the business and the new owner's personality.

A lot of contractors are taking advantage of the land rush for contracting businesses by private equity and selling. For most, selling their companies is a one-off. It is something never before experienced and maybe, something unlikely to be experienced again. Since it is a new experience, contractors do not know what to expect.  Here are six possible surprises. 

1. You Pay More Taxes Than You Imagine 

No one should be surprised that taxes accompany the sale of their business. What can catch people off-guard is the amount of the taxes, the sheer magnitude of the
number. Depending upon the timing of the sale, Tax Day may catch you unprepared and illiquid if the proceeds of the sale have been put to use in long term investments. If you have to sell stock or land, you may also be creating recognizable short-term gains for the following year, which are taxed at a much higher rate than long-term gains.

2. You Lose Your Business Tax Shield 

Small business owners often use the tax laws to their legal advantage to minimize taxes and expenses. For example, you can hold an annual Board of Directors
meeting in a tropical paradise and expense the travel using pre-tax dollars. Or, a spouse might be named a director of the company give use of a company vehicle as a perk of the office. Neither of these examples is unlikely to continue post sale.  The result is that many contractors underestimate their personal expenses. 

3. You Lose Control

As a business owner, you are used to calling the shots. There is no one to tell you what you are “allowed” to do, or what you cannot do. Once you sell, your business is no longer your business. It belongs to someone else. They make the rules, not you. While this seems apparent, experiencing it is a slap in the face for most contractors. You no longer have control 

4. You Get a Boss 

The longer you are self-employed, the more unemployable you become. Yet, if you sell your business and stay around, you will become an employee. You will have a boss. You will need to please your boss. You will need to report to, and be
accountable to your boss. While you know this will happen before you sell, actually experiencing it is something else.

5. You Lose Freedom

As a business owner, you can take time off whenever you want. If you build a business that can operate without your continual presence, you enjoy a degree of freedom most people cannot imagine. As an employee, your personal time off is limited and permission must be granted in advance.

6. You Lose Your Identity 

Before you sell, your identity is wrapped up in your business. This will continue if you stay on, but will eventually disappear. You will no longer have a role as a contractor or as a business owner. When someone asks you what you do, you will struggle to answer. You know what you used to do, but that no longer applies.

Nevertheless, You Gain a Lot

Despite it all, many business owners still sell. Why?  It is nice to get money-whipped. Whenever you feel frustration of a sense of loss you can pull up your portfolio, count the digits, and revel in the fact that you did it. You lived the American dream. All in all, life will be pretty darn good.

Need help building a salable business?  You need the Service Roundtable, which has helped thousands of contractors become more prosperous. Learn more at www.ServiceRoundtable.com or call 877.262.3341.

About the Author

Matt Michel | Chief Executive Officer

Matt Michel was a co-founder and CEO of the Service Roundtable (ServiceRoundtable.com). The Service Roundtable is an organization founded to help contractors improve their sales, marketing, operations, and profitability. The Service Nation Alliance is a part of this overall organization. Matt was inducted into the Contracting Business HVAC Hall of Fame in 2015. He is now an author and rancher.