What Actually Happens the Year Before You Sell Your Business
In Grosse Pointe, I rarely meet business owners who regret building their company.
I often meet business owners who regret how they exited it.
The year before a sale is not just a transaction year. It is the most financially consequential 12 months of your life.
This is when decisions are made that permanently shape:
Your tax liability
Your long-term income
Your estate structure
Your lifestyle flexibility
Here are the mistakes I see most often in the 12 months leading up to a sale.
1. Waiting Too Long to Involve a Financial Planner
Most owners talk to:
Their CPA
Their M&A attorney
The investment banker
They rarely talk to someone modeling life after liquidity until the deal is already structured.
By then, it’s too late to influence:
Deal structure (asset vs stock sale)
Installment vs lump sum
Earnout risk exposure
Allocation of purchase price
State tax residency planning
Once a Letter of Intent is signed, your leverage drops significantly.
The year before a sale is when modeling should happen.
Not the month before closing.
2. Underestimating the Tax Impact
Many owners mentally anchor to the gross number.
“I’m selling for $12 million.”
That is not what hits your account.
Between:
Federal capital gains
Michigan tax
Net investment income tax
Depreciation recapture
Possible state exposure if you’ve relocated
The net can be materially lower than expected.
And if the deal includes:
Earnouts
Seller financing
Equity rollover
Your tax timing becomes even more complex.
I have seen owners surprised by seven-figure tax bills simply because no one ran the full liquidity simulation early enough.
In higher net worth exits, tax planning is not an afterthought. It is central.
3. Failing to Model Post-Sale Lifestyle Overhead
Many owners selling businesses in the Grosse Pointe area already have:
A primary residence
A Northern Michigan property
Possibly a Florida home
After a sale, lifestyle often expands.
Bigger boat.
More travel.
Helping children with real estate.
oining new boards or philanthropic commitments.
The mistake is assuming the sale proceeds are “infinite.”
A $10M net liquidity event invested conservatively does not behave like an operating company generating active income.
You have converted a high-cash-flow asset into a finite capital base.
That capital must now support:
Income
Taxes
Inflation
Legacy goals
Without structure, lifestyle creep quietly becomes permanent capital drawdown.
4. Ignoring the Psychological Vacuum
This is the one most owners do not anticipate.
For 20–30 years, your identity has been tied to:
Decision-making
Employees
Revenue
Responsibility
Then one day, it is gone.
The year before the sale is when you should be designing the next chapter.
Because after closing, many former owners:
Make aggressive private investments
Overallocate to speculative deals
Start new ventures without a capital framework
Commit to financial decisions simply to feel engaged
This is rarely about money.
It’s about relevance.
Your post-sale investment plan should anticipate this behavioral shift, not react to it.
5. Not Updating the Estate Plan Before Liquidity
This is a costly oversight.
Once liquidity hits:
Your estate value may double or triple
Your exposure to federal estate tax may change
Gifting strategies become more complex
Trust structures may need revision
The optimal time to adjust estate strategy is before the balance sheet inflates.
That is when:
Valuations may still be lower
Gifting shares may be more efficient
GRATs or other strategies may be more effective
Waiting until after closing removes some strategic flexibility.
The Pattern I See
Owners assume the hard part is building the business.
In reality, building it is only half the equation.
Exiting it correctly determines whether:
The capital outlives you
Your children inherit structure or confusion
Your lifestyle remains flexible
Taxes are optimized or simply accepted
In Grosse Pointe, most owners are not selling to downsize life.
They are selling to convert concentrated risk into long-term stability.
The year before a sale should be about:
Liquidity modeling
Tax projection
Post-sale income design
Estate coordination
Behavioral planning
If you are within a few years of selling your business, the time to structure the exit is not after the offer.
It is before negotiations finalize.
Because once the deal closes, your leverage is gone.
And the decisions made in that 12-month window will shape the next 30 years.
