Thinking about selling or transitioning your business? Here’s what you need to know

The aspect of running a business that’s most likely to be overlooked? It’s the same one that will ensure the longevity of your business after you’re gone.

“Transition planning is one of the most under-planned and procrastinated areas,” said Stacy Allred, Head of Family Engagement & Governance for J.P. Morgan Wealth Management. Why? “Because the topic is complex, can feel overwhelming and we don’t know where to start. Transition planning is something we don’t do often (for many business owners, it’s their first time going through the process of planning to transition their business), so we don’t gain experiential learning to get really good at it,” Allred explains.

It may be tough to think about, but stepping away from your business some day on your own terms will likely require a careful and well-executed transition plan. Read on for some insights on the current market, the tax environment and other key considerations for business transition planning. Consider how you might leverage the learnings of others to increase insights and take steps to make progress on your planning.

How do you make the right decision for your business?

When helping business owners think about transition planning, Allred recommends leveraging a decision-making framework, such as the “WRAP” process developed by academics and brothers Chip and Dan Heath, a practical tool designed to combat four key villains of decision making. “WRAP” is an acronym comprising the four elements detailed below.

Highlights of applying the Heath brothers’ WRAP framework to selling a business would include:

The economy feels pretty uncertain right now. Is it a bad time to sell?

Going into 2025, the market seemed promising, according to Courtney Culliton, Executive Director with Global Banking Transaction Development for J.P. Morgan Commercial & Investment Bank. Buyers were eager to execute transactions, with private equity firms sitting on piles of dry powder that they were ready to put to work.

“But then, as you all know, uncertainty hit our market again,” said Culliton. “So a lot processes and steps toward a process were put on pause.”

But that doesn’t mean selling your business is off the table.

“Contemplating when to enter into a transaction – it doesn’t have to hinge on economic uncertainty,” Culliton said. Instead, that decision should be based on how delaying the sale could add more value to the business. “If I get another year under my belt, I can meaningfully improve my revenue, cash flow, demonstrate my financial performance, strengthen my management team, improve the quality of our operations and financial reporting, and maybe sell for a higher price or potentially even a higher multiple,” Culliton added.

Midway through the year, Culliton sees assets coming back to the market, and investors are showing interest in making deals. Enterprise value multiples may still be compressed relative to their 2021 peaks – but that shouldn’t necessarily be the topmost consideration for business owners.

“It’s not important when you’re thinking about a transaction to think about squeezing out the last dollar,” Culliton said. “You want to really think about the partner. Are they the right partner? Are you on the same page in terms of the post-transaction plan? How are they to work with? What are their ultimate plans and goals for the business?”

“There’s never going to be a perfect time to come to market,” she added. “It depends on the goals of the business and the business owners.”

What are buyers looking for?

First, the financials. Culliton pointed to revenue growth and cash flow generation as two important financial considerations. “Investors and buyers, they are certainly looking for growth in your revenue, but it’s not growth at all costs,” she said. It is important to demonstrate profitability and cash flow.

Because of this, ensuring you have reliable financial reporting and key performance indicators is important before proceeding with a transaction. Culliton recommends that business owners consider having an audit or a quality of earnings done, as potential buyers will likely want to conduct their own analysis.

Next, the people. “Buyers and investors are looking for a solid management team,” Culliton said. “They’re looking for a team that have their arms around the business, understand issues that need to be addressed and can clearly communicate the growth plans as well as effectively manage the operations.”

Last, the potential. “They’re looking for opportunities that have the potential to continue to grow,” Culliton said. “What does the white space look like? How and where can the business be expanded to increase the size of the platform? What does the next demand curve look like and how can this business make sure it is well positioned?”

Okay, what about taxes?

Now that the Trump administration’s One Big Beautiful Bill Act has passed Congress, business owners can make their transition plans fully mindful of new tax law.

Some changes are retroactively effective for the whole of 2025, while others go into effect next year. The estate and gift tax exemption, which increases from $13.99 million per person to $15 million per person, is effective starting January 1, 2026. It covers, among other gifts, the transfer of business interests to your descendants, and will be adjusted each year for inflation.

Sarah Daya, Executive Director and Central Lead of Wealth Planning and Advice for J.P. Morgan Wealth Management, suggests that it may be optimal for some business owners to consider making gifts now, while valuations are lower. “Even [when it goes] to $15 million, we’ll still have time to capture that additional exemption,” she said. “But we want to make sure that we’re being thoughtful about planning and that we’re taking advantage of the tax law where it’s at today.”

Additionally, “There are some qualified small business stock (QSBS) provisions that change. If we need to make decisions about converting from an LLC to a C-Corp., the sooner we do that, the better,” she said.

How do you avoid seller’s remorse?

According to the Exit Planning Institute, three out of four business owners who sold their businesses “profoundly regretted” that decision within a year. But the reason is not necessarily because they made a bad deal – it’s because of what comes after, Daya suggested.

“Every business is going to transition at some point,” she said. “So we really want to think about not just the business itself but also how’s that going to impact you personally.”

“Once you sell that business, what are you doing next?” Daya added.

Allred recalled speaking with a business owner who, despite having a great deal in front of him, was hesitant to close the sale. “He shared that he had a few friends who had meaningful lives and who sold their businesses, and now all they were doing was playing golf,” she said.

What could a more meaningful next chapter look like? For that particular business owner, it meant focusing more time on health and wellness, doing some traveling, restoring old cars with his son, mentoring business students, giving back to the community through philanthropic projects – and yes, also enjoying playing golf.

“In designing this vibrant next chapter, he was able to move from one meaningful chapter to another one,” Allred said.

An aspect of the design for your next chapter could be staying on with your business in either a leadership, sales or operations capacity, often with much more flexibility. Considering you have built a great business and learned a tremendous amount along the way, part of your deal to sell your business could include a post-transaction employment agreement. Leadership and management talent continues to be at a premium, and you may be able to continue on with your business under its new ownership.

The bottom line

It’s never too early to start thinking about the future of your business. Whether you’re considering a sale in the near future or planning a transition down the line, a J.P. Morgan advisor can help create a comprehensive strategy for your business. Get connected today.

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