12 BWD | Spring/Summer 2015
By Heidi Bolger, CPA/ABV, CM&AA, CGMA and Mary Van Skiver, CPA, MBA, PHR, CEPA
What’s your
transition strategy?
Business transition planning is more important than ever
For most family business owners, transferring ownership of perhaps their biggest asset to the next
generation — whether by sale, gift or bequest — is the largest transaction of their lives. Yet few have a
formalized plan for making the transition.
Why you need a plan
Three key objectives
Transition planning has always been important, but in today’s
environment it’s particularly critical. At one time, retirement was
a relatively brief phase of life, but today people are living longer
than ever before. Maintaining your lifestyle in retirement while
providing for your family demands a structured, formalized
approach.
There are many strategies, techniques and tools for business
transition planning — but every transition plan is based on
three key objectives:
As the number of baby boomers looking to transition their
businesses continues to grow, selling a business to a third party is
becoming more competitive, while working through ownership
changes with family members, management or employees is
increasingly complex. To improve your chances of a successful
outcome, you need to start planning now. Recent studies
indicate that failure to conduct pre-sale planning is the number
one reason deals fail. In fact, only one in five businesses are
successfully sold. However, the number improves to nearly 80
percent for organizations that plan for their transition.
A formal plan helps take inventory of your current business
and personal financial situation, determines where you need to
be when you reach retirement age, and implements strategies
needed to get there.
1. Maximize business value
The first step is to determine the current value of the
business. This includes analyzing the value drivers in
order to identify opportunities to increase the business’s
worth. For example, if your management team is weak
or the business relies too heavily on you, training or
recruiting management talent can increase the value of
the business.
Of course, strategies for maximizing value depend on
how the business will be transitioned and to whom.
Preparing the business for sale to a strategic buyer, for
example, will likely look very different from preparing for
a sale to employees or gifting to family members.
(For more on business valuations, see Determining the
real value of your business on page 14.)