Planning: the Strategy for Transition
Planning for Transition is like designing a blueprint or laying a foundation based on your vision for the company. The transitioning success depends on the quality of your plan. In planning, your trusted advisors - such as your accountant, banker, attorney - as well as close family and friends, play an important part. Success in transition planning is not a solo effort. The ROCG process includes your trusted stakeholders.
Proven Benefits of Planning
- Written plans make businesses sell faster
- Written plans make businesses sell for higher values
- Formal well written transition plans make businesses more attractive to buyers
- Businesses with written transition plans are risk down-graded by financial institutions
- Businesses with written transition plans are perceived to be more professional and of a higher quality
A Will for your Business
Planning for transition (or succession) is like drawing up a will for your business. It shows forethought, instills confidence in the present owner and management as well as elevates the business to a higher professional status. The difference is that this will is executed while you are alive and you are the beneficiary.
The best time to start planning is right now. Because, like every other wealth creation method, the more time you have to build your assets, the more wealth you will accumulate.
But wealth creation is only one reason. The other reason you should be working with ROCG is that we understand your objectives - both personal and business; our planning process allows for all your stakeholders to be included, for all your objectives to be understood and clarified so that your unique plan can be created for the realization of these objectives.
When should I start planning?
Ideally, you should start years before you contemplate exiting your business. You have nothing to lose by planning early and a lot of money to gain. Setting up your business to sell for its maximum potential value takes a number of steps. And this can often take time to implement.
Collaboration with your trusted advisors such as your accountant, your attorney, your financial advisor is critical at this stage. Your trusted advisors will do a lot more work for you than they would normally envision. As the business owner, you must realize that putting together your team at this point is essential for your success.
What type of life do you want after transitioning your business? To whom do you want to sell your business? To a third party? To your employees? To a relative?
What needs to be changed to make your business: (a) more attractive to a buyer, and, (b) more financially valuable to a buyer?
When do you want to exit from the business? Perhaps you do not want to exit totally from your business. You want to retain ownership but not carry the burden of managing the day to day operations by yourself.
The ROCG consultants don’t tell you what to do. We point out the options open to you. And we inform you of the results that you can expect by taking certain actions.
Here are some of the key issues
- Your goals on exiting the business
- for the business
- personally
- financially
- Identifying the barriers to exit
- A review of the key factors, which are:
- Business owner’s financial needs
- Business dependence (this includes how dependent the owner is on the business financially and how dependent the business is on the owner to be a viable operation)
- Who would want to buy the business? What kind of buyer would find the business attractive to purchase? This helps determine the strategy for selling. It identifies whether it might be more suitable to consider a management buyout or taking the company public so the public equity markets' interest can be gaged
The outcome is the Transition Plan. The transition plan allows you to seamlessly move through to the next phase of transitioning your business. However, even if you do not move forward, you will have gained invaluable information and insight about the issues you need to think through in the total context of transitioning. And you will be on the right track to protecting your downside.
Steps to the Transition Plan
The key to your transitioning success lies in the quality of your plan.
The first step is the Discovery Meeting. This session is free. ROCG favors your advisor (such as your accountant, your attorney, your insurance specialist, your wealth advisor, close family members, etc.) being present at the Discovery Meeting. This meeting is invaluable in showing you how the process rolls out. All your questions can be answered before you begin.
There are matters such as business value, the legal review of agreements and contracts with employees, non-competes or stay agreements, buy-sell agreements, and so on. There are also the potential needs such as mentoring or coaching individuals to help in the management transfer; working on the personal aspects of the owner's new life so that boredom and depression don't set in because of a loss of identity, not having something of significance to do or even losing a place to go. These services supercede the mere business aspects. ROCG is unique in understanding the human part of transfer with the need for a life purpose. This too is part of the plan. So you see why we say that the quality of the plan determines the success of the transition.
Case Studies