IIBUSINESSII
“If you fail to plan, you are planning to fail.”
CREATING A TRANSITION PLAN
MAXIMIZE YOUR SALE PRICE AND POST-SALE WEALTH STORY BY THOMAS M. DOWLING CFA, CFP, CIMA
The quote above, by one of our founding fathers, Benjamin Franklin, is still relevant today. It is our experience that most entrepreneurs do not have a formal plan to ensure they maximize the value of their business. We also find of the business owners who have put plans in place, many do not consider how to maximize their postsale personal wealth. The end goal for many successful entrepreneurs is to be able to sell their business when they are ready for the next stage of life. Often, an entrepreneur’s business is the bulk of their net worth. Being able to sell it successfully not only validates the owner’s life work, but also allows them to enjoy the fruits of their labor with a substantial influx of cash. Many entrepreneurs spend a small fraction of time on creating a plan to exit their business. The most important step that gets overlooked is putting a formal transition plan in place for transferring ownership of a business. A formal plan is designed to structure the
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company (and its employees) for the firm’s eventual sale to new owners. A transition plan can maximize the sale price as well as the health and continuity of the company itself and its key employees. A transition plan should have two components: Corporate Exit Planning and Personal Wealth Planning.
CORPORATE PLANNING
Business owners often fail to plan because of lack of time and the feeling that now is not the right time to start preparing. Without a plan these owners may sell for far less than what the business is worth or be unable to sell it at all. It is important to think about your exit the same way you would building your business, which is in a thoughtful and systemic way. The transition plan should have steps and be concrete. Business owners who create transition plans are more prepared and focused.
