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Retiring Soon? 5 Tips to Getting Started With the Business Transition Process

At the most basic level, business transition planning is a strategy that can be used 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 it changes hands. 

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

Building an estate plan

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 the transfer of your business. This may include a financial professional evaluating your personal and business tax returns and reviewing 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 considering restructuring your business for tax purposes. They may be able to 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 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 also need to be evaluated. 

Tip #4: Include Your Employees

Sharing your transition strategy with those you employ at some point in your plan may be helpful. Prepare answers to some tough questions; you should prepare to be as transparent as possible. Securing employee buy-in can be a powerful element of your strategy and lead to essential conversations with those you trust most. 

Remember, your business isn’t the only thing that will change during 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 worries.

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 smart. Consider designating a single point of contact who can help coordinate 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. Like your business, managing your transition is a team effort; you can’t 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.

Invest In a Life You Love,

Donovan Carson - founder of Carson Capital



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