Every business needs to have a business transition plan for protection when changes are going to be made. There is a lot of complexity to these types of plans and the owner is dependent upon the success of the plan. We have created 6 essential steps to ensure that your transition plan can help your business be the most successful. If you would like guidance on creating your transition plan for your business, Cooper Norman offers it as part of their financial planning services.
Step 1: Assess the Marketplace
This is step is applicable if you are looking to sell your business, if you are not, then you can skip this step. It is critical that you are aware of the current market that your business is in. Ask yourself: is my product or service in high demand? Will it still be in 5-10 years? Once you are aware of those items, create a list of buyers who you could realistically see being reasonable candidates.
Step 2: Assemble Your Team of Advisors
No one person can create a business transition plan on their own. Now it’s time to create your team and together you will create your plan. You will want to make sure that you find people who you can trust and are knowledgeable about what they are doing. You’ll need to have one main advisor to keep things organized as well as attorneys who can give advice and insight.
Step 3: Prepare Your Business
Creating a business transition plan is a huge step for your business! It is essential that you do an in-depth assessment to identify issues that might affect your company from selling. Be honest about this. It is also advisable to have your business and personal tax returns done by a professional. You’ll want to have all of your documentation up to date.
Step 4: Obtain a Valuation
You can choose if you’d like to do an informal and a formal valuation or just a formal valuation. For the informal valuation, you will need to hire a business broker and a business appraiser for an formal valuation of your business. When you meet with a broker, they are able to provide you with an estimated range.
Step 5: Prepare for Financial Goals
It’s important to set goals for your business such as the minimum amount you’d like from the sale. While setting your goals, figure out how much money will be enough for your needs and wants for your business and personal life. Lastly, consult with your accountant on goals and other things to consider when making your goals.
Step 6: Advise and Prepare your Family for the Transition
This step is applicable if your family members are involved the business. It is essential to keep your family informed every step of the way and tell your family sooner rather than later about creating a business transition plan. Everyone who is a part of the business should be involved in important decisions and communications.
