Ned Minor guides business owners through an exit-planning process aimed at reaping top dollar for the sale of their companies. The Denver attorney sees that the U.S. as being on the brink of an enormous transfer of wealth, with half of the country's 9.6 million well-established, middle-market companies reporting that one or more of the owners is 50 or older. Surveys show that 80% of all business owners expect to transfer their companies to a key employee or family member when they retire -- but the reality, says Minor, is that the scenario plays out just 20% of the time.

Knowing how and when to begin the exit-planning strategy is key to smoothing the transition and ensuring a financial reward appropriate to the years of sacrifice most business owners have invested to establish and build their outfits, he says. Minor, the author of Deciding to Sell Your Business, the Key to Wealth and Freedom, spoke recently with Smart Answers columnist Karen E. Klein. Edited excerpts of their conversation follow.

Q: What's the toughest part about selling a business?
A: I think the hardest thing for most entrepreneurs is making the decision to transfer or sell the business they spent so many years building up and working on. It's an emotional process and most entrepreneurs do focus on selling to an employee or transferring to a family member. But when a business owner finally makes the decision that he really wants to leave the company and move on with life, he usually realizes that the largest asset he owns is his business and he won't achieve financial independence until he sells. Oftentimes, family members and employees aren't going to pay top dollar for the company and don't have the money to buy it outright. And most owners don't want to become bankers for people who want them to carry a promissory note for years.

Q: What kind of money are we talking about, in terms of average sale prices?
A: I represent privately owned businesses that fall in the middle-market area -- not mom-and-pop shops, but companies with fewer than 100 employees and annual revenue between $5 million and $500 million. They can sell for anywhere between $5 million and $250 million, with most in the $50 million to $100 million range. But even $25 million is a big payday for an entrepreneur. I find that most of my clients expect that what they get for their company is going to finance the lifestyle they want for the rest of their lives.

Q: When do most entrepreneurs start thinking about selling their companies?
A: When they have gone through what I call the three cycles of business: There's startup, when they're thinking survival and making payroll. That lasts between one and three years. Then there's the growth cycle, when the company is established and the founder is trying to grow it organically or through acquisitions. That can be anywhere from 10 years to 20 years or longer. Eventually, they go into wind-down mode, where they find themselves wanting to do something different, needing a change, and getting tired of running the company day after day. That's when most of them think about succession planning.

The more perceptive business owners, of course, start designing and implementing an exit strategy the day they buy or start the company. I tell people to run their business like it's for sale every day, so that anytime there's interest they can be ready. Keeping the end goal in mind and planning for an eventual exit is the smart way to do it. And what most people really want out of their company is to achieve wealth -- whatever their idea of wealth is. If you want to come out of this experience as a business owner with a big pay day, you're thinking every day about what you're doing and how each decision you make ultimately increases the value of your business.

Q: How do you get your business ready for a sale, even if that day is years down the road?
A: There are small things you can do all the time. For instance, your books should always be in order and your physical location should always be neat and clean. You should be grooming a management team for the eventual day that there's an acquisition or a sale. You should not be the kind of owner who makes everybody identify you -- personally -- as "the business." No one wants to buy a company that is so overly identified with its owner that it's unimaginable that the company could exist without you.

Q: How does a business owner choose the person she wants to buy the firm someday, assuming it's going to be an insider?
A: You can sense the people who are most committed to the organization. Most entrepreneurs have much of their identity and their platform in the community tied up in the company. It makes sense that they find someone with a similar loyalty and emotional and even spiritual connection to the company. Your successor should be working nights and weekends to help improve the business. She should have the drive to make it the most successful company possible. She may even come to you with the idea of buying the firm someday.

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