FAQ #2: I have owned and run my own middle market business in Austin, Texas for decades and the business is solidly profitable and represents a significant valuation if liquidated. I am ready to retire, and my adult children have absolutely no interest in taking over the business. Can you please provide me with your best advice for preparing the business for sale, finding a business broker to assist me in the sale, avoiding taxes as much as practical, and investing the proceeds to allow for a comfortable retirement and for my heirs to inherit the generational wealth?

Exiting a long-held, profitable middle-market business in Austin is a major milestone. Because your children do not desire to take over, your goal shifts toward transferring institutional knowledge, maximizing cash on exit, minimizing friction with tax authorities, and establishing a multi-generational legacy structure.Since middle-market businesses generally fall into a $10M–$500M+ valuation range, the transition requires an investment banking firm rather than a main-street business broker.

1. Preparing the Business for Sale (12 to 24 Month Runway) To command top-dollar multiples from private equity (PE) or strategic buyers, you must make the business run without you.

Build a Strong Second-Tier Management Team: Buyers discount businesses tied directly to the founder. Hire or promote a CEO/COO and key leadership so operations remain uninterrupted after your departure.

Normalize Financials (EBITDA Quality of Earnings): Engage an independent accounting firm to perform a sell-side Quality of Earnings (QofE) report. This cleans up personal addbacks, normalizes working capital, and validates cash flows before buyers start due diligence.

Remove Customer Concentration: If any single client accounts for more than 15% of total revenue, focus on diversifying. High concentration significantly lowers transaction valuation multiples.

Document Systems & Recurring Revenue: Focus on contractually recurring revenue streams, standardized Operating Procedures (SOPs), and clean legal structures/IP ownership.

2. Finding the Right Sell-Side Advisor / M&A Boutique Investment Banker For a middle-market business, look for middle-market investment banks or specialized M&A advisory firms. Selection Criteria: Look for firms with Certified Merger & Acquisition Advisors (CM&AA) or Certified Business Intermediaries (CBI), FINRA licenses (Series 79/63 for equity stock transactions), and direct experience in your industry in Central Texas.  Fides has experience with the investment bankers, and can recommend the best fit for you.  

Key Interview Questions: "Do you typically run a competitive auction process with multiple strategic and PE buyers?""What percentage of your closed deals in the past 3 years were structured as asset sales vs. stock sales?""What is your fee structure?" (Standard midde-market fee is a retainer plus a success fee, often structured as a tiered percentage of deal value).

3. Minimizing Taxes on Sale Proceeds  Hopefully, you have a good long-term relationship with a tax firm that has both corporate and personal tax expertise, but if not, Fides can assist by recommending the right tax advisor.  Texas has no state individual income tax, which eliminates state-level capital gains taxes. However, federal tax exposure (20% federal capital gains + 3.8% Net Investment Income Tax + potential depreciation recapture) can take 25%–40% of transaction value if unmanaged.  Section 1202 / Qualified Small Business Stock (QSBS): If your business is organized as a domestic C-Corporation (or can convert well in advance) and met the gross asset test at issuance, you may qualify to exclude up to $10M–$15M or 10x your basis in federal capital gains.  Installment Sale (IRC Section 453): Defer taxes over multiple tax years by accepting structured buyer notes or earouts rather than 100% upfront cash.Charitable Remainder Unitrusts (CRUTs): Transfer a portion of pre-sale business equity into an irrevocable CRUT before signing the definitive purchase agreement. You receive an immediate income tax deduction, the trust sells the equity tax-free, and pays you or your heirs income streams over time.Stock Sale vs. Asset Sale Negotiation: Buyers prefer Asset Sales for step-up depreciation; sellers prefer Stock Sales to get capital gains treatment instead of ordinary income rates on recaptured equipment/inventory depreciation.

4. Investing Proceeds & Multi-Generational Wealth Planning  Again, during the planning stages for the sale transaction, you should have estate attorneys involved as part of the process.  Fides can recommend estate counsel if you do not have an estate plan in place.  Some considerations;  Once liquidated, your goal shifts from wealth creation (single-asset risk) to wealth preservation, cash flow generation, and estate tax insulation.

Structure portfolios with tax-loss harvesting mechanisms and dividend yield engines to supply guaranteed retirement distribution rates without drawing down core capital.Consider gifting shares of the business or pre-sale assets into irrevocable trusts for your adult children before the sale valuation peaks. This keeps future growth and sale proceeds out of your gross estate for estate tax purposes. Assets held until death receive a step-up in basis to fair market value, eliminating capital gains tax for your children when inherited.

Fides works with RIAs with family office services and private wealth advisory services, and can help you find the right fiduciary wealth advisory team specializing in high-net-worth liquidity events to coordinate your estate planning, tax preparation, and asset allocation under one unified strategy.