Innovation

Essential Questions for Successful Exits

Consider these following questions before you embark on creating a succession plan

Written by Rick Spence

You’ve put off your succession plan because you’re busy running your business. But have you taken into account the magnitude of the soul-searching and decision-making you’ll have to do? If you haven’t already, don’t delay. Consider the following questions when embarking on your succession plan:

  • Personal: Am I ready to retire? When should I do it? What will I do next? What will I do with the money? What do I want to accomplish in the rest of my life? And, of course, what effect will this have on my partner? How do our goals align?
  • Family: Does someone else in the family want to take over the business? How do I choose a successor? What if more than one person wants to run the business? How would I choose? Could my kids work together? How soon would they be ready to take over? What kind of training and experience do they need before I go? How do I avoid setting off disputes that could last a lifetime? And, of course, how does this expected transition affect the estate planning I’ve already done?
    Jordan Gould, a partner at accounting firm SBLR, notes that it has been common in the past for business owners to work out an internal succession plan in their heads—and not tell the family or staff members involved. If you don’t include these people in your planning as early as possible, you could be in for a shock when you find out they have other plans.
  • Business: Is this business salable? What shape is it really in? What has to change to make it easier to transfer this firm to someone else? Are the financial statements clear, truthful and up to date? What problems have I been ignoring that now need to be addressed? To whom do I need to start passing on the knowledge and experience that would enable this business to run without me? Are there outstanding legal, insurance or tax issues—or other skeletons in the closet—that need to be resolved? And, of course, how do I keep this secret, to avoid frightening trusted employees or longtime customers?
  • The transaction: Who would buy this business? Who will guide me through the transition process and sale? What other options are out there (merger, asset sale, windup)? How do I get optimal tax treatment? How can we structure the deal so I get paid without placing a crushing burden on the buyers (a concern with insiders such as family and employees)?

Read: Tsunami Warning about the impending, albeit delayed, succession crisis

Originally appeared on PROFITguide.com