Retiring Soon? 5 Tips for Starting Your Business Transition Plan

In simple terms, business transition planning is a strategy that can be put into play when a business is sold or changes hands. For company owners nearing retirement, a successful transition plan can play an important part in creating and preserving the value of the business after its changed hands.

Here are some tips to keep in mind if you want to maximize the return on your investment as you prepare for retirement.

Tip #1: Evaluate Your Market Potential

Take a long, honest look at your business and the broader economic climate when estimating your chances of a successful transition. Consumer confidence in your community, region, or industry may influence the future value of your business. It may also be helpful to note the growth of your enterprise versus the industry overall. Additionally, doing this early and long before you hope to transition your business may help reveal the potential for future growth.

Tip #2: Prepare Your Business

Next, look for anything that may delay or negatively impact your business transfer. This may include an evaluation of your personal and business tax returns by a financial professional, as well as a review of any potential local or state tax issues. If you have a business presence in multiple states, this may also help avoid potential tax issues.

Now is also an ideal time to contact a tax professional if you're thinking about restructuring your business for tax purposes. They may help navigate the potential drawbacks and highlight any benefits that may result from a restructuring.

Tip #3: Do Your Due Diligence

If your business's financial documents aren’t up to date, now is the time to remedy that.

Standard documents to check could include:

Incorporation documents
Equity ownership records
Meeting minutes
Tax classification records

If you do have equity holders, do you know if they are entitled to a right of refusal? Additionally, if your business owns any intellectual property, are you certain it has been properly registered? The answers to these questions may have considerable implications for your transition plan.

This is also the time to start thinking about your existing business relationships. Existing long-term contracts or distribution agreements may need to be evaluated as well.

Tip #4: Include Your Employees

At some point in your plan, it may be helpful to share your transition strategy with those you employ. Have answers ready for some tough questions, as you should prepare to be as transparent as possible. Securing employee buy-in can be a powerful element to your strategy, leading to essential conversations with those you trust most.

Remember, your business isn’t the only thing that is going to change through your transition. The livelihood of your employees and their families will be impacted as well, meaning it’s important to allow them to voice their concerns. Creating a safe space for open conversations may help alleviate their worry.

Tip #5: Ask for Help

If you’re like most successful entrepreneurs, you already have a dedicated team of professionals to help your business. In addition to the CPAs, insurance agents, or wealth managers you may already utilize, an attorney specializing in estate planning and a business attorney may be valuable additions to your team.

Choosing one key individual or “transition czar” to lead the group may also be a smart move. Consider designating a single point of contact who can help with the coordination efforts and clear up confusion during the transition period.

Remember, it’s okay if you’re unsure which steps to incorporate into your transition plan first. Just like your business, managing your transition is a team effort; you can’t just rely on a single leader. However, taking an active part in your business transition and actively seeking the advice of financial professionals may increase your chances of success.

About Eric

Erickson Braund is the Founder and Chief Financial Officer at Black Walnut Wealth Management. He is a Certified Financial Planner®️ professional and a Chartered Retirement Planning Counselor®️. Eric brings over 20 years of experience working with high net-worth individuals and families, helping them achieve their goals of protecting and growing their wealth for retirement and for generations to come. Because Eric is a CFP®️ professional, he adheres to high ethical standards and engages in at least 30 hours of approved continuing education in the financial industry each year.

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