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Preparing for a Successful Business Transition

Mario O. Vicari, CPA Director, Family-Owned Businesses Group Co-Leader, ESOP Group Leader

Mario O. Vicari, Director, Audit & Accounting

Studies have shown that as many as 75 percent of business transfers do not meet the owner’s goals. This is principally because many owners view only one variable in the transaction– obtaining the highest price. While price is critical, others factors such as terms, timing, effect on employees, and the owner’s ongoing role are also very important. We often encounter owners who do not have a clear picture of what they want from the transfer and are not in a position to properly evaluate various opportunities.

In our experience, being prepared for a transfer involves two components: business readiness and owner readiness.

Business Readiness

A business transfer can take many forms, including an outside sale, an intergenerational family transfer, or an ESOP. We often get questions about how to prepare for a certain type of transfer. No matter what type of transfer the owner is considering, our response is always to organize the company in a way that will create the maximum value for the shareholders. Adopting a value creation mindset requires you to change your view from CEO or owner to an investor who requires a return on invested capital.

The best way to adopt this mindset is to organize your business to run without you. This is often a very difficult task because it takes skill and it requires you to step away from the day-to-day running of the business and organize it so it can run successfully with others in charge. In order to move toward an investor mindset, concentrate on:

People – Do you have the right people in place to drive the company forward once you are no longer working in the business on a day-to-day basis? If the answer is no, you need to upgrade your talent. A strong management team that can run the business without the owner adds a lot of value from the standpoint of an outside acquirer.

Governance – The governance structure of your business needs to be strong enough to compensate when the owner is not present. Form a board of directors or advisors to assist your management team and hold them accountable. Make sure you have more formal reporting structures and systems in place to provide increased visibility into the business.

Strategy – We find that companies often spend too much time and attention on tactical execution, at the expense of strategy. Allocating time for strategy at the management and board level will add value to your business.

Owner Readiness

An owner needs to be emotionally and financially prepared for a transfer. To get there, you need to be able to answer two key questions: How do I envision my life after the transition and how much is enough?

Arguably, the hardest part of any transition is the emotional readiness of the owner. You have an emotional attachment to your business and it is difficult to break away from the feeling of owning and running it over a long period of time. I have interviewed several owners post transition and they all admitted that this was the hardest part. There is no playbook; everyone addresses their exit differently. However, being stuck in inertia is not the right answer. Talk to others who have walked in your shoes and learn from them. Having a basic vision of your life away from the day-to-day running of your business is a must if you are serious about transition.

Your financial readiness will be determined by how well you understand your personal financial situation and your lifestyle needs. This should provide an indication of your financial needs in retirement. A good financial planner is critical to this process.

Knowing your financial needs and resources will help you identify how much is enough for your business. Knowing your required minimum will give you the flexibility and clarity to evaluate all your options and make a decision when the time is right. While transitioning a business is difficult, you can increase your chance for success by considering the famous quote of Louis Pasteur, “Chance favors the prepared mind.”

Mario O. Vicari can be reached at Email or 215.441.4600.


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Mario O. Vicari, CPA

Mario O. Vicari, CPA

Director, Family-Owned Businesses Group Co-Leader, ESOP Group Leader

Construction Specialist, Family-Owned Businesses Specialist, ESOPs Specialist, M&A/ Transaction Advisory Services Specialist, Transition/Exit Planning Specialist, Business Valuation Specialist, Owner Operated Private Companies Specialist, Private Equity-Backed Companies Specialist

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