Don’t Put Off Planning Your Business Transition
An estimated 80 percent of business owners will sell their company within 10 years. If you’re one of them, have you devised a comprehensive exit strategy?
A recent survey by GW Equity and the University of Dallas School of Management reveals that four out of five U.S. business owners will sell their company within a decade. Interestingly enough, a similar survey conducted by ROCG, a business transition consulting firm, found that a whopping 58 percent of business owners have not planned for their eventual sale whatsoever.
Effective planning is the key to a smooth, successful transition to a new owner. And it’s certainly best to plan sooner rather than later because you don’t want illness or age to force your hand. ROCG has created a white paper that offers advice to business owners about transitioning their small- and mid-sized companies. The following basic, yet important questions were gleaned from that white paper. Carefully consider these as you develop your business transition plan.
What do you want to get out of the transition? Take your time answering this question. Think about what you want to do, what you want to be and what you want to have after the sale. Imagine what your ideal calendar would look like, and use the sale as the vehicle to get you there.
Are you sure you’re ready to let go? The bond between owner and business can be strong, and letting go might not be as easy as you think. Time and money can be wasted if you prematurely go forward with the sale. You should consider how you’ll likely keep busy when there’s no longer an office to go to each day, too.
What will it take to fund your desired lifestyle? A comprehensive business review is necessary to ensure that the wealth you need to extract from your business is comparable to the business’ future exit value. You may find it necessary to improve profits and/or make the business more attractive to potential buyers.
Have you considered all available transfer methods? Make lists of all the different means of transferring your business as well as the types of buyers most likely to be interested in it. A careful comparison of these lists will help ensure you meet your overall goals.
Is your strategy in writing? Unfortunately, only 9 percent of business owners surveyed by ROCG have a formal transition plan in writing. A written plan is vital because it serves as a road map for transition execution, detailing all the steps necessary to complete your exit.
The ROCG white paper is available at www.business-transition.com. In addition to reviewing that paper, I encourage you to click on the Blackman On Taxes column listed in the Editor Picks window above. Using a fictional shop as an example, Irving Blackman outlines a transition strategy that enables a shop owner to achieve his financial and personal goals with the sale of his company.