Banking & Finance and Small Business & Startups

Who should be on your business transition planning team?

March 31, 2016
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After working tirelessly to build a successful business, deciding to transition that business to new ownership is an exciting and emotional time for any entrepreneur.

Though transition is a natural part of any business’ lifecycle, preparing for the change in ownership involves many important negotiations and decisions. Whether you’re planning on a management buyout, outright sale to a third party or turning your business over to a family member, the best way to ensure a successful transition process is by preparing early, reviewing your plan annually and preparing with the right team.

Eric Seifert, a business growth specialist at the Michigan Small Business Development Center, recommends beginning the transition planning process at least two years before the actual transition takes place. However, many businesses begin the process anywhere from five to 10 years before the anticipated transition. Assembling your transition team and engaging in the transition planning process helps to continue build the value of your business, creates a long-range plan for the business, helps discover talent within the organization and preserves organizational knowledge.

The following individuals should be on your transition planning team, according to Seifert: the coordinator; a CPA with transition experience; an attorney with transition experience; a wealth manager; and a certified personal financial planner.

The coordinator: This person acts as the “quarterback” of the transition planning process. They facilitate meetings, act as mediators and enhance the communication between the business owner, transition team members and future owners.

CPA with transition experience: A CPA, specifically one with business transition experience, can help you navigate the process of business valuation and asset allocation. Many business owners are surprised about the effect of taxes on their business’ sale price. A qualified CPA can help you analyze the tax consequences of doing a sale transaction. While some CPAs might have business valuation experience, a designated business valuation expert is often included separately.

Attorney with transition experience: As you develop your transition plan, it is important to recognize that your regular business attorney might not have the experience necessary to skillfully guide you through the transition process. Engaging with an attorney with this specific experience helps lay the groundwork for a seamless transition for all parties, including assessing company structure, intellectual property considerations, business valuation, charitable goals, negotiating a sale and other important decisions.

Certified financial planner: As a business owner, you will also need to work with a certified financial planner to determine how the sale of your business affects your own personal needs. A financial planner can help you decide how much money you need or want to live on after the sale of the business, including the role that social security plays. After the sale of a business, investing the net proceeds often yields the bulk of an individual’s income. The financial planner can help direct your choice of where to invest the proceeds of the sale. If the financial planner does not provide investment products, a wealth manager would be added to the team.

These individuals bring important perspective to your transition plan. Once developed, the transition plan should be updated yearly. Additionally, the business’ valuation should be assessed each year, updating the transition plan accordingly. Though transition planning may initially seem overwhelming, taking the time to assemble the right team is a critical step in developing the right plan to transition your business into its next phase of success. 

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