- Start planning early (at least 2-3 years before exit if possible, if not longer).
- Get a valuation (this helps us determine whether the business will provide enough value to fund your retirement, what kind of tax hit you are looking at, whether there are estate tax issues, and what level of planning and associated cost are warranted).
- See a financial advisor (this helps you determine how much you need to retire among other things).
- Train your successor: build the next generation of ownership who can run the company after you leave (this also creates potential buyers).
- Build a transferable business, one that can run without you (this runs counter to a lot of owners’ need for control, but you’re just going to have to let go of that).
- Be clear about your objectives, including what you’re going to do when you retire. Do you want the most money as soon as possible or are other factors more important e.g. your legacy, the continuity of the firm, continuing its mission, or what happens to your employees and clients? Many owners get their sense of identity from their business and lose that when they retire. Be sure you know who you are going to be when you retire.
- Have a Hit by a Bus Plan in case something happens to you before the full exit/succession plan unfolds.
- Be flexible/adaptable. Exit/succession plans rarely unfold exactly how they are written at the beginning. Stuff happens. You and your buyer(s) need to be okay with adapting the plan to deal with changed circumstances.
- Find buyer(s) with compatible personalities and communication styles, trust, shared vision and compatible goals.
- Build a good adviser team. Make sure one of them is clearly designated as the quarterback with overall responsibility to coordinate the process. Let them communicate directly w/each other; don’t keep each one in his or her own silo and only communicate with them yourself.
I hope you enjoyed reading the Top Ten Tips. Feel free to contact me if you have any questions.
This article is not intended and should not be relied upon as legal or tax advice pertaining to any specific matter. You are encouraged to seek competent legal and tax counsel before proceeding with any transaction involving any of the matters discussed above.