One of the cardinal rules of business is to not leave money on the table. That’s easier said than done, however, if the business owner is not aware of the true value of her company, or has misconceptions about what’s possible in pursuing a sale.

Every couple of years, this long-term client — a businesswoman who owned a well-established and highly regarded nursery school and kindergarten — brought up the topic of retirement. The owner had a contract with the federal government to run a daycare; in exchange for agreeing to enroll a certain number of students who were children of federal employees, the school enjoyed benefits like lower costs on rented space. She was concerned that her company’s value was tied up with the government contract, and would not sell easily or profitably.

Consistent Expert Guidance

Every time the owner brought up her wish for retirement and her misgivings about being able to sell, she was met with the same response from Sylvia Lagerquist, CPA: Don’t sell yourself short. Don’t sell your company short. Don’t leave money on the table — there is real value here. 

Over time, the advice of her trusted CPA led the owner to reach out to her contact in the government who connected her with an organization that works with federal contracts in running daycare centers. To her delight, the owner discovered her government contract was not a limiting factor at all, and she successfully sold her company for her target price. 

 A Trusted Liaison 

Finding the right buyer for her business was crucial, but expert guidance in navigating the sale also proved essential. The buyer was an attorney, and offered to draw up the purchase agreement. Lagerquist Accounting & Advisory identified and helped the client avoid the agreement’s potential pitfalls, serving as an intermediary between the owner, her attorney, and the buyer. 

The first issue they discovered was that the purchase agreement focused primarily on the seller’s obligations, giving short shrift to the responsibilities of the buyer. Lagerquist helped the owner navigate the purchase agreement to ensure equitable terms, and proper presentation of required documents.

As the negotiated price required that the business meet certain key performance indicators, Lagerquist also helped the owner establish Q1, Q2, and Q4 as the measurement time periods, avoiding having those metrics skewed by the low attendance rates that naturally occur over the summer months.  

Ensuring Tax Efficiency

Expert tax guidance can result in considerable savings, as this client discovered. Lagerquist assisted the owner in structuring the deal to be as tax efficient as possible, which involved leveraging a knowledge of the varying tax rates associated with the components of the sale. By maximizing the allocation of sales price to goodwill as opposed to tangible assets like furniture and fixtures, the client was able to minimize their tax liability.

Even after the sale of the business, Lagerquist remained involved in helping to determine the proper allocation of tuition funds and liability for bills between the original and new owner. 

The trusted relationship the business owner formed with Sylvia Lagerquist, CPA over the years led her to benefit from the expert advice of an Oursourced CFO, understand the true value of her business, and successfully negotiate its sale. Learn more about the many benefits of working with a team known for their expertise in helping small business owners achieve their goals by contacting Lagerquist Accounting & Advisory today.