2020 has been quite a year. Pandemic, market volatility, and social unrest. As a business owner, you have plenty on your mind already. For some, this year has given them more reason to pause and consider what their business might look like in the future. For many owners, the question on their mind is – how much longer can I do this?
Despite the inevitability of passing on the torch, few take the time to plan the transition properly. Your business was and continues to be a considerable part of your life, making it difficult to begin considering transitioning. Avoiding the topic altogether, though, does not help you or the company in the long-run.
Is it Too Soon? Or Too Late?
So, let’s start thinking about transition planning. It may feel too soon, but what happens if you wait? Without starting on a plan early, you may inadvertently relinquish control of your future outcomes through a few possibilities:
- An unsolicited purchase offer: Owners are often tempted by a seemingly good offer from the first suitor and rush to sell, but what if another suitor is out there who is willing to pay your more, possibly much more?
- Increased taxes: Improperly structuring your company and personal estate for a sale can create significant tax consequences.
- Untimely passing or major disability: Lack of planning may jeopardize business continuity and leave your successors unprepared to handle the business.
- Unexpected change in the business climate: Optimal windows for liquidity events come and go. Being prepared to capitalize on an opportunistic sale or liquidity event can make all the difference.
Is Your Business Aligned with Your Future?
When you get right down to it, transition planning is a good business strategy. It should be incorporated into your business as early as possible. Effectively transitioning your business will take time and careful planning and reflect the years of work done in advance.
Transition plans need to address not only your business goals but also your personal and financial goals. Many questions may arise during the process, including:
- How do you help ensure that no chips are ‘left on the table’?
- How can you ensure your employees are taken care of in a transition?
- Can your business continue without your leadership?
- What do you need financially to support your post-transition lifestyle?
- What makes a business attractive to a buyer? (Hint: It’s more than the bottom line.)
- Which exit strategy is right for you?
- Sell to a strategic or financial acquirer? Transition to family members? ESOP?
- How should your internal transition or sale be structured?
- Who will help you get through this successfully? Remember: Running your business while preparing for a transition can be overwhelming. It takes skill and experience to fully understand the intricacies of the selling process.
Join Us for Our New Transition Planning Series
Whether you plan to hand the keys to your children or sell to the highest bidder, correctly transitioning a business is a complex process. At Aldrich, we understand what goes into planning for an owner’s optimal exit strategy. Not only do we have a group dedicated to helping you successfully transition your business, but also specialists to address each step and question along the way.
Over the next several months, our team is diving deep into a series focused on transition planning. We’ll be covering top transition topics and answering your questions to help you develop a well-designed transition plan. And when the time comes, with a plan in hand, you will be ready to exit on your terms.
If you have questions about transitioning your business or learning more now, please contact your Aldrich Advisor.
Meet the Author
Senior Business Advisor
Brian Andreosky, CEPA
Brian Andreosky joined Aldrich in 2019 and is dedicated to helping business owners transition their companies. In this role, he provides exit planning services to help clients maximize the value of their businesses one to five years before marketing the business for sale and is a member of the Exit Planning Institute (EPI). Prior to joining…
- Business owners
- CEPA, Certified Exit Planning Advisor