As a business owner, you want to make sure that your company successfully continues for generations to come. So, when you eventually retire or step down from your position, it is important to consider how you want to proceed with passing on your business to the next generation. Consider the following five tips.
1. Highlight your goals. Do you plan on passing your business down to your family, or do you prefer to transition to a buyer? Figure out your goals behind transitioning your business well before you intend to pass on your business. You should give yourself ample time to prepare for any obstacles along the way.
2. Create a clear strategy. Create a clear exit plan strategy as you move forward with the transition. Always be sure you have this plan set before you start so you do not run into confusion while transitioning. Consider the following to include in your strategy as you prepare:
a. Timing of this transition: Give yourself enough time to ensure whoever you will be transiting your business to can meet your current vendors and/or clients. Also, in the case of a family member, you have the unique opportunity to personally mentor him/her about running the company and engage them in the running of your company now.
b. Financial matters: How many shares will you be distributing of your company? What will be your compensation as you leave the company? Be sure you highlight financial issues clearly and consult with the appropriate experts to make sure these financial issues are handled well. How will you pay for it?
c. Communicate to all who will be affected: Always be sure to include your clients, your employees, and anyone of interest about this potential transition. Be clear about your expectations for the transition, such as outlining clear responsibilities for whoever will remain in the company. Give everyone the chance to voice their opinions and questions about the transition.
3. Form a team. Business transition is a tricky process, and it is important to remember that you should not attempt to proceed on your own. You may come across certain legal, financial, and other unexpected issues that need attention. Thus, you should always remember to seek the experts you need to ensure you get the most out of the transition. Create a strong transition team that you can trust.
4. Prepare documentation. You need certain information as you prepare for your transition, so be sure that you have all the necessary documentation available. Some items can include:
a. Financial documents of your company
b. Contracts with outside vendors, customers, etc.
c. Corporation documents
5. Be prepared for the unexpected. As in any situation, there may be obstacles along the way. If you are set on transitioning your business, you should not be fazed. And when the time comes for the transition, you should give full control to the new individual taking over.