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Transition planning for businesses: When to start?

There are certain absolutes; no situation is the same as any other, therefore do NOT copy what someone else did. The variables include differences within every company, size, industry, maturity, each ownership group, founders, successors, key managers, offspring of the ownership group, ages, life stage, personal values, family structures, short term expectations, long term expectations, personal financial status, etc. As you can see, the situation from company to company can never be the same, the plan should fit you—you should not have to fit into some mold.

A five-to-10-year lead time allows for thoughtful planning, and assessments of personal and business issues. A few years will allow you to think and create a plan that will achieve your goals and let the business continue in a manner that is consistent with your values. The planning needs to be done in a structured manner, allowing time for thought, considerations of alternatives and repositioning of the business. Other steps might include management team assessments, alternative courses of action analysis, inside transition vs. outside sale options, and ultimately accumulate the personal wealth that allows you to live comfortably, and provide heirs with desired wealth according to your wishes.

Several organizations set out planning processes, most based upon best-selling books that seem to be the basis for groups of planners and consultants looking for the structure. Experienced advisors have gathered and developed structures, which allow us to set up the process in seven or eight stages. The Exit Planning Institute and Business Enterprise Institute are two such organizations that lay out a roadmap, something like this:

  • Accumulate owner objectives
  • Assess all current business and personal financial resources and future needs
  • Understand the business value, maximize the value and protect this asset
  • Sale to outsiders?
  • Sale to insiders, family and/or management teams
  • What will the business continuity look like in years to come?
  • At the finish line, what is your desired wealth accumulation, and is this protected?

This is what we help you do. From our standpoint, one of the most import steps on our end is, we need to be sure to listen, ask questions and then not incorporate our personal values into your plan. We have seen hundreds of transitions over the past 30-plus years. We have seen every degree of success, as well as failure. We can counsel you on the potential pitfalls, undesirous results, tax costs, business management shortfalls, but at the end of the day, this will be your plan.

What is our best suggestion? Get started!

The delay, constant procrastination, is our enemy. Start something today, ask us questions. You don’t have to finish this overnight if your start the process sooner rather than later. We’re here to help.

Anthony Duffy is the managing director of ValuQuest based out of our Albany, NY office.

This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.