All too often, private company owners wait until they are ready to transition out of their business to actually begin the transition planning process. This is a common mistake that owners make—starting the process too late and without the proper help. This generally happens due to a lack of understanding about the complexity of the process. Arguably, this is one of the most complex issues a senior generation business owner will ever face.
When we work through this process with clients, we break it down into five important areas:
- Preparing the next generation of family leaders and owners to run the company
- Creating the succession plan for non-family executives
- Determining whether the company’s financial health is sufficient to handle a potentially large shareholder transaction
- Assessing the financial health of senior generation family members in preparation for their retirement
- Evaluating the emotional readiness of senior generation leaders to confront their retirement and allow others to run the company
These are some of the most complex human and financial issues a business owner can face and they require time and outside advice to handle properly. There are many areas that require advice, including insurance, financial planning, business valuation, taxes, and transaction structuring, just to name a few. There may also be a need for a family business advisor or a development process for next generation leaders.
Since the transition process is so complex on so many levels, allowing enough time is critical. We feel it is best to begin the process 10 years from when you expect to transfer the business. There is no exact playbook on transferring your business, but enlisting the right expertise to help you and allowing enough time to process it all are important steps.
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