Busting the Biggest Transition Planning Myth

Myth: “My CPA will tell me when it is time to start planning for my business transition.” (Replace CPA with “attorney,” “financial planner,” or “insurance professional” and the transition planning myth remains intact.)

Fact: Your advisers, be they CPAs, attorneys, or financial or insurance professionals, may not initiate transition planning discussions primarily because you have not told them you are interested in leaving your business. Other reasons include:

  • Your advisers may or may not have the experience they need to guide you to a successful transition. As a result, they don’t think to ask you of your plans.
  • Your legal and accounting advisers may focus their attention on compliance-type activities (Directors’ Minutes, an employee problem, tax returns, etc.) and don’t “see the forest for the trees.” They solve specific problems or issues that clients bring to their attention. Many are simply not transition planning oriented. Similarly, financial and insurance professionals often focus on a smaller subset of overall planning—perhaps investment planning or life insurance planning to meet income needs or estate tax costs.
  • No single profession possesses all of the skills and experience necessary to single-handedly lead an owner through the transition planning process. Additionally, some professionals may not be comfortable cooperating closely with professionals from other disciplines for the benefit of their common clients. The result can be that the process stalls before it really gets started.

Having said that, there are, of course, many advisors who are exceptions to these generalizations.

It is dangerous to wait for others to take the first step. You need to take the initiative, but how?

Ask your current advisers about their experience with successful transition planning. Ask them what advisers they work with to help facilitate, design and implement business transition strategies.

Read and learn. Don’t assume that advisers will alert you when the time is ripe to begin your transition planning. Take the initiative—as you do when you read this newsletter—to prepare for your own exit from your business.

Ask other professionals for suggestions. Your CPA, attorney and financial and insurance advisor aren’t the only ones equipped to help you. Lawyers and CPAs are not the sole sources of ideas regarding planning and tax ideas. Your banker, business consultant, business broker, investment banker or valuation specialist may provide you with important exit planning information. No matter which advisor you speak to, emphasize your desire for confidentiality as you work through the exit planning process. Even though planning for a successful exit should be at the top of every owner’s agenda, the word “exit” can give employees, vendors and customers the wrong impression. Don’t be afraid to ask any professional—especially those you have not retained in the past—to sign confidentiality agreements before you share information about your company.

Planning for an owner’s exit is, at its core, a multi-disciplinary approach. It is simply too difficult for one professional to do it all. Further, some professionals may lack the training and/or the temperament to involve professionals from other disciplines when they first begin to represent a client. For these reasons, many advisors mistakenly assume that Exit Planning is the responsibility or practice area of some other professional. Understandable as all of these obstacles to action are, they can impede the owner who is ready to begin the exit planning process.

The bottom line is this: accepting this transition planning myth as reality can be dangerous. It may be up to you—not your advisers—to initiate the first step. After all, it is your business.

The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial advisor. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial advisor. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. Exit Planning is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need.

This is a newsletter published by Business Enterprise Institute, Inc., and presented to you by our firm.  We appreciate your interest.

Any examples provided are hypothetical and for illustrative purposes only. Examples include fictitious names and do not represent any particular person or entity.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional. James Moore will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.