Business Succession Planning Calculator

Common methods are: a multiple of EBITDA (typically 3-8x for small businesses, higher for high-growth or recurring revenue), discounted cash flow, asset value plus goodwill, and comparable transactions. Industry-specific rules of thumb (e.g., 1-2x annual revenue for many service businesses) are common starting points.

Through some combination of cash, seller financing (often 5-10 years at 5-8% interest), bank or SBA financing (SBA 7(a) loans up to $5M), buyer earn-outs tied to future performance, life insurance funding for buy-sell agreements, and ESOPs for employee buyouts. Pure cash sales are the exception, not the rule.

A buy-sell agreement (triggered by death, disability, retirement, divorce, deadlock), an updated operating or shareholder agreement, key-person life and disability insurance, a written succession or transition plan, and updated estate documents that align with the business plan.

At least 5-10 years before any anticipated transition. Early planning enables tax-efficient gifting, training of successors, sale-leaseback structuring, and locking in valuation discounts. Owners who plan late typically receive 20-40% less than those who plan early.

It's an arrangement where the seller acts as the bank: the successor pays an upfront amount and then makes regular payments to the seller over time. It's common when the buyer can't secure bank financing or when the seller wants to spread taxable income across several years.

It's the contract that governs how the business changes hands. It defines which events trigger a sale, how the price is set, and how the purchase is funded. Without one, the death or departure of an owner can lead to costly disputes or a forced sale of the business.

An asset sale versus a stock sale, installment-sale treatment, and intra-family transfers each carry very different tax consequences. An accountant and a tax attorney should review the structure before you close any deal.

The seller can foreclose on the security interest in the business. That's why it's critical to confirm the business's historical cash flow can cover the payments before finalizing the deal, rather than relying on optimistic projections alone.