It’s easy to overlook the future during the daily operations of your business. However, as an owner, you’ll eventually need to transition away from your business. Effective business transition planning is crucial to ensure a seamless exit. Whether you intend to sell your company or hand it down to your family, let’s consider these strategies to facilitate the process.
Merger and Acquisition (M&A)
Strategic planning can be helpful for any business. But when they think of business strategy, many business owners don’t think ahead to exit planning. You may have considered this if you’ve already entertained a few business exit strategies.
M&A deals are one of the strongest exit strategies, as you have some control over pricing and terms. With an M&A sale, you’re selling your business to an expanding company — often a competitor.
The downside is that these deals can be very complex, and many fail. If you’re considering an M&A deal, your best option is to consult an expert in effective succession planning.
Passing on to Family
For many business owners, the idea of keeping a business in the family is an appealing one. But if you want to pass your business down to a family member, it’s still important to attend to details and plan as you would with any other exit strategy.
If the lines between personal and professional become too blurred, your family may experience unneeded financial and emotional stress. Strategic accountants and other transition experts can help minimize that stress and guide you through a succession planning process.
If you have family members who are already involved in the company, this transition will likely be smooth. However, remember that for family succession to work, you must have at least one relative with the interest and ability necessary to run your business.
This exit planning strategy is one of the smoothest of all. With a management buyout or employee buyout, you sell the business to an existing senior employee. Because the buyer already has a close connection with the company, operations can continue as usual.
Management buyouts are typically much more straightforward than a sale to a third party.
Selling to an employee is an excellent alternative if you have no family members willing and able to take over the business. If you’re planning on retiring after making the sale, a wealth management expert can help you use that money to fund a comfortable retirement.
Consider liquidation if you’re seeking a simple exit strategy for business planning purposes. With this strategy, your business will be dissolved after you leave. Although it’s a common exit strategy for failing businesses, liquidation is also a viable option for a successful business if you’re having trouble finding a buyer (or don’t want to go through the complex merger or acquisition process).
The process of liquidation involves closing your business and selling all assets. Of course, you’ll want an accurate business valuation before you do this. Liquidating a company doesn’t often yield much profit, so if your business is very valuable, another exit strategy may be better.
Does your business include many highly skilled employees? If so, another company may be interested in “acqui-hiring” your business. This simply means that another business primarily purchases your company to recruit your employees.
This might seem like a hassle for the purchaser. However, this process is often faster and more cost-effective for larger companies than hiring and training their employees.
Like most other lucrative exit strategies, “acqui-hiring” can be complicated. An exit planning advisor will be able to look at your business and help you determine whether this is a viable strategy for you.
Create Your Small Business Transition Plan with Vesta
Business succession planning is essential for any business owner but creating that plan alone can be very challenging. With Vesta, you can work with a Certified Exit Planning Advisor (CEPA) to create a detailed, actionable plan.
However, we do more than business exit planning. Vesta offers comprehensive business coaching services, including accounting, analysis, strategy, and planning. Contact us today to see how we can help your business!