Business owners think about transition planning too late! Many don’t think about transition planning because they believe that they will just sell their business and that’s the end of it.
However, even with the sale of a business transition planning is critical. The buyer becomes your successor instead of a family member or a current manager in your business, so transition planning is required no matter what your exit strategy!
Planning for your transition is critical to your family and employees. Case in point – the bus scenario! What would happen to your family and employees if you got hit by a bus? Not something most people like to think about, but it’s the elephant in the room.
Understanding Transition Planning From 30,000 Feet
There are many facets to transition planning and this is one of the reasons small business owners avoid it. When discussing your transition plan you need to consider a number of different yet related topics including, but not limited to:
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- Personal and Business Goals & Objectives
- How Decision Making Gets Done
- Selecting and Training Your Successor
- Owner Estate Planning
- Contingency Plans for Possible Scenarios
- Considering Corporate Structure & Transfer
- Preparing for Business Valuation
- Select Your Exit Strategy
- Execution of Your Succession Plan
The challenge in all of this is that many of these topics are an expertise in and of themselves, therefore you needs the help of a strong team.
Who Should You Include in the Process?
If you should use a transition planning team, who should be on the team? It depends on your situation, but at a minimum you need:
- Accountant/CPA
- Lawyer
- Financial Planner
- Management consultant
The accountant and lawyer are a given. But, what about the financial planner and management consultant?
You want a financial planner to assure you understand your financial options so that you achieve the financial independence via your exit strategy. They will be helpful in looking at various financial scenarios from perspective you might not consider. In most situations this is a good counter-balance for the CPA who looks at the transaction from the entity’s or business perspective.
A management consultant is very useful addition. They provide the ability to execute everything the others will say needs to occur with the business to achieve the desired result. Most trusted advisors look at succession planning from the perspective of their discipline . The management consultant will bring that objective balance required to maximize the return on investment of the business’ resources.
How Do I Start My Transition Planning?
The process can get pretty complicated, but if you do it properly you can step away from your business in 3 – 5 years. The key is keeping an eye toward creating a self-sustainable business.
Creating a self-sustaining business is our focus at DE, Inc. In the coming weeks I will explore this from perspective of transition planning. Stay tuned!
Great article – look forward to the rest of them.