Business owners spend decades building the value of their business with the intention of one day transitioning that business to either a family member, a group of employees, or to another company or private equity buyer. A successful transition plan begins with evaluating the following key factors. You should consider which of these factors are important to your goals and begin thinking of how you prioritize these factors to select the best strategy for your business.
Timing of Cash Flow
Impact to Legacy
Time and Money Necessary to Prepare and Close Transition
Owner Role in the Business after Closing
Cost/Complexity of the Transition
Helpful suggestions to get started and keep you on-track for a successful transition include:
1. Think ahead. Preparing for a successful transition to retirement can be a lengthy process, sometimes necessitating time to modify strategies depending on how circumstances develop. Although it might sound early, 10 years before retirement is not too early to begin planning.
2. Evaluate (and re-evaluate) your business. Scrutinize what the value contributors are for your business. What do you need to do with your employees, equipment, facility, and other aspects of your organization to be ready for a successful transition? As you begin that work, honestly assess your progress. Are you getting where you need to go? Will you need outside help from your professional team or a consultant to help you get prepared?
3. Evaluate (and re-evaluate) your goals. We all start with trying to figure out how much money we need for retirement. It is a great starting place. From there, you can think about things such as your personal goals for the timing of the transition, how active you want to remain in the business, and how important it is to you to provide a transition for the employees. As you learn more, does that alter your likelihood of achieving some of your transitional goals or require you to re-prioritize?
4. Work to develop your business to attract a transition. As you evaluate and re-evaluate your business and goals, you will begin to identify what kind of transition would be most likely to succeed and the steps that you need to take to realize that success.
5. Consult with your professional team. If the process seems overwhelming, it is partly because it involves many considerations. Use the talents of your professional team to chart your path to successfully transitioning your business and preserving the value you have worked so hard to build.
6. Download Exit Planning for Your Business, A Matrix to Identify the Right Buyer. This workbook was designed to provide you the tools necessary to evaluate your goals and understand how the factors apply to the different exit strategies.