Transitioning Your Business
Most business owners like to tuck this topic somewhere in the back of their minds. Thinking about leaving the business that they created is difficult. The business has been their family, their identity, and their source of income. Thinking about endings and saying good-bye with things we value is not easy.
Ideally, a business owner should always be thinking about how they might transition their business. Things happen in life, which means we don't always have the choice as to when we may have to sell. Life events, such as death, disability, and illness are unpredictable, and can leave a business owner scrambling to maximize value and preserve their legacy if one were to occur. Without a written contingency plan for these events, a business may not survive. In this contingency plan, broad topics as to who will run the business if the owner can't, how key people will be retained, and how decisions will be made are key to perpetuation.
Long term planning, absent of a catastrophic life event, involves many areas including:
- A business owner should consider what trusted advisors will help in the creation and execution of this plan.
- Consideration should be given to how the owner would like to transition the business. Are there family members who could take on ownership?
- Is the best course of action to sell to an outside buyer at the highest price?
- What about the company culture and environment that you want to sustain well after you are retired?
- Will you have enough to live on after you sell?
- How do you maximize company value prior to selling?
- When should I start preparing my company to sell and how do I do that?
So, what should your advisory team look like? Thought should be given to someone knowledgeable who can "quarterback" a team of qualified advisors. Members of this team would include a CPA, attorney, insurance agent, estate planning expert, a wealth management advisor, a banker, and possibly a business broker. Planning and organizing this team is best if done several years before you want to sell, when there is enough time to make sure the business is both attractive to a buyer, and the seller's company is ready to be sold.
This is an emotional topic and process to go through. Doing so well before the business is sold is a very important step to minimizing the stress and confusion that inevitably ensues without a very detailed plan.