Selling a business is one of the most stressful things for a business owner. The main reason is there are no do-overs. There is no dress rehearsal for it. Once the business is sold, you’re going to either feel like you got enough or you’re going to feel like you didn’t get enough. And a lot of the times, the best way to circumvent that is to create a plan in place to how you’re going to produce income in retirement instead of just depending on, I’m all of sudden going to sell, I’m ready to sell, now I’ve got money, what to do with the money?
Actually start looking at advance of, how do I start taking these steps to get to where I can transfer ownership and then maintain a lifestyle that’s equivalent to what I was used to in the past? If you’re wanting to sell to an employee, usually the best timeframe is at least about 10 years. If you’re looking to do it within a five-year window, there are some options, it’s doable. One of the hardest challenges that an employee has is they have no money. And now they’re in a spot where you want them to buy into the business.
And there are ways to be able to structure plans, to be able to get money into their hands, to then be able to buy the business. And it’s not just giving them money, they have to actually work for it. Where we’ve talked about retention plans as a big part of it, non-qualified deferred compensation arrangements, big words, I know. However, you can be able to set up a structure to where they have the ability to buy in. And there are many different ways to be able to structure this. And the biggest disadvantage sometimes is where the person who’s selling; could be yourself, to where now they are using the future profit expectations of that business to be able to pay you for whatever it was sold for.
So let’s say that someone else buys that business. Now they’re depending on the profits of the business to pay you, which there’s a chance, like what if that business gets driven into the ground? What if it’s not producing the same amount of profits anymore? What is your next step? This can also lead to what they call double taxation.
So think about it, the person who is buying the business has to pay income tax on the profits that they make. Then those profits after they paid income tax now get paid to you for whatever the amount is and now you have to pay capital gains. There are ways to help circumvent this by using things like the lowest defensible value, direct compensation type arrangements, there are lending options available. So you can be able to spread and create a really cohesive plan where in times it could match what you might be able to get for selling it to an outside person.
If you have anyone that might be interested in ownership, now is the time to start talking about it. And if you’re within like a time, 10-year timeframe, this is the time you should get a plan in place to be able to start that transition. And if things don’t work out, it’s fine. You actually always have like a kind of a fail-safe in the backend. And in worst case scenario, if things do kind of fall apart, you could end up consider an alternative route to sell your business.
If this something that you want to chat further about and you’re trying to explore your options, want to see where you should go next, reach out to us, we’d be happy to talk with you.
Video Summary:
Selling your veterinary practice is one of the biggest financial and personal decisions you’ll ever make—and unlike other business moves, there are no second chances. Once the deal is closed, you’ll either feel confident in the outcome or wonder if you left money on the table.
Unfortunately, many practice owners wait too long to plan their exit. They assume the sale itself will fund retirement, only to face unexpected challenges: employees without the capital to buy in, tax traps that shrink the payout, or a successor who struggles to maintain profitability.
The key is starting early. Whether you’re 10 years away or within a five-year window, there are proven strategies to structure ownership transitions, reduce taxes, and protect your income so your lifestyle doesn’t suffer after the sale.
👉 Ready to explore your exit options? Schedule a complimentary call with our team today and take the first step toward a confident, stress-free transition.
This material is intended for general public use. By providing this content, Park Avenue Securities LLC and your financial representative are not undertaking to provide investment advice or make a recommendation for a specific individual or situation, or to otherwise act in a fiduciary capacity. Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. Tom is a Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. Florida Veterinary Advisors and The Next Step Planning Group are not an affiliate or subsidiary of PAS or Guardian. California Insurance License #0K80141. AR Insurance License #15823672. Florida Veterinary Advisors is not registered in any state or with the U.S. Securities and Exchange Commission as a Registered Investment Advisor. The individuals associated with Florida Veterinary Advisors do not maintain specialized licenses or qualifications for the financial services provided to veterinary professionals. 7989827.1 Exp 5/27