Are you thinking of transitioning out of your business? Do you feel lost on where and how to begin?
The exit planning process requires you to think about when you want to transition out, who you feel comfortable transferring or selling your business to and how the transition will take place.
A common concern for owners when it comes to selling or transitioning their business is not knowing where to start or who to talk to. Preparing for the eventual transition of your business is a process not an event, which means even if you are not ready to scale back for another five years, it is never too late or too early, to start planning.
Daunting as it may be, it is important to begin thinking about your business’s critical issues as they can take longer than you think to resolve. Begin trying to envision what life after your business might look like. Do you want to work after the sale and gradually give over the reins or will you want to walk away and never look back? There are no wrong answers, the important part is thinking about it and working with a team of collaborative professionals to help you through the process.
Have you given thought to the following areas of your transition plan?
How much planning and work is needed to get your company ready to transition or sell? Have you met with an exit planner or succession planner to review all the critical areas in your company and discuss where you can build value in the business? Areas such as sales, technology and systems, marketing, human resources and management teams among others can be assessed to determine where there may be issues or opportunities to build value. Taking the time to make changes will ultimately drive the value of your company and increase the chance of a sale and a successful transition.
Have you thought about how easy or hard it will be to give up control of your company? Is there a plan for who will lead the company and how you will transfer your insight and knowledge from years of experience? Part of the transition plan is diving deep and coming to terms with what you really have control of, and what you don’t.
Start thinking about how it will feel to not have control over every decision and how this might start to give you some relief and reduce stress. If you have a leader, partner or a family member in mind to take over, you can start assessing the knowledge and skills they require and start a conversation about the possibility of succession. Once you get excited about the possibilities, you can begin to develop an action plan for the transition of knowledge and responsibilities and ultimately position your company for long term success.
The thing you have the most control over is you and acknowledging this will help you remain accountable for your many critical decisions. Having a solid understanding of your areas of influence will enable you to make the best decisions possible for the company when the time comes to transition.
Part of your transition plan is evaluating if you are financially ready to sell or transition out. For most owners, their business is their biggest asset and quite often, they do not have an accurate idea of what their business is worth. While the business may be generating a large income for the owner, its sale value may not provide the income they need to maintain the lifestyle they have become accustomed to. You will need to work with a team of advisors to determine what your business is worth today, how to maximize value if needed, evaluate when the right time to sell or transition is and how the sale will support you in retirement or your next venture.
Meeting with advisors to understand your personal and corporate financial and tax situation will help you recognize your options. It is important to review and analyze what you need financially from the business to meet your long-term objectives and have conversations around the lifestyle you want to maintain in retirement.
Life After Business
Thinking about leaving your business may be difficult but preparing and planning will ease the pain. Aligning your personal goals and vision is vital in a successful transition plan. Have you really thought about how you might spend your time once you transition out of your business? Do you have family you want to spend time with, hobbies to enjoy, places you want to see or charitable organizations you want to dedicate time to?
Part of your planning process should be spent assessing where your personal and mental wellness is today and where you need to be before and after the sale. Begin connecting and communicating with family and friends about your plans. Start to think about what life after business looks like and document it. This is a key component of a successful transition and can help reduce the chances of regretting your decision.
Give yourself time to evaluate what is best for you. It can be difficult for many owners to transition out of running a business but proper planning can help ensure you’re ready for, and even excited about, whatever the next chapter holds.
For more information or for answers to your questions about starting a transition plan and assessing your personal needs, please connect with Intent Planning.