10 Things Owners Should Do to Prepare for Transitioning Their Business
You are prepared to transition your business if…
1.You have spent some time and money getting educated on the process of how to transition your business. You have discussed transitioning with your loved ones.
2.Your personal, financial and business goals are aligned meaning they are defined, co-dependent, and linked.
3.You have created an advisory team which includes at minimum: an attorney, CPA, wealth or financial advisor, exit advisor, spouse or other family member who is involved in the business or transition. Other advisors that may be included are (may not be a professional): personal friends and advisors, bank executive, M&A attorney, estate planning attorney, real estate attorney, business attorney, ESOP specialists, tax specialist, insurance specialist, foundation / charity, key employees, investment banker or broker, board members, family counselor.
4.You have created a contingency plan which should include buy-sell instructions, appropriate insurance, and specifies what should happen if before you transition something was to happen outside of your control that would prevent you from operating your business or unwillingly force you to transition. You have reviewed this plan with your trusted advisors including family members and/or partners if applicable.
5.You have a completed a strategic analysis, business valuation and personal, financial and business assessment(s) within the last year.
6.You have considered of all your exit options and optimum deal structure and weighed the strengths and weaknesses of each in relation to your stated goals and objectives.
7.Your transition plan is written and includes goals and objectives, clearly defined tasks and accountabilities, definition of your transition team, definition of your transition process, a plan leader or quarterback, timelines, a budget and your role before and after transition. This plan ideally has a multi-year implementation timeline.
8.You have considered and designed a post business life-after plan. This plan is linked or part of your wealth management plan which has been prepared by a professional financial advisor and if applicable, estate planning attorney, insurance specialist, tax specialist and charitable foundation specialist.
9.You have a pre-transition value enhancement / preliminary due diligence project underway to de-risk the business, maximize its value, minimize taxes upon transition and improve the probability of a smooth transition to the next owner including family if applicable. Family transitions should be treated no differently than other transition options. This plan ideally has a multi-year implementation timeline.
10.You have a management program underway to ensure the post transition leadership is prepared to operate the company after you exit and secured the appropriate specialists to handle your desired transition option.
by Christopher M. Snider, CEPA
Copywrite 2013 Exit Planning Institute