Making a Graceful Transition – What is Your Plan?
Originally published on January 6, 2016
Updated on November 1st, 2023
You’ve spent years, perhaps even decades, building your largest asset – your business. You’ve poured your energy and finances into it, sacrificed your time for it, and made it your personal legacy. It provides a valuable service for your customers and a way for your employees to put food on their tables.
So what’s your plan for your business when you’re no longer running it?
Retirement might seem like a far-off event, or maybe you don’t plan to stop working at all. But as the saying goes, the only constant in life is change. So chances are pretty good that you will eventually want to do something different. Or maybe you won’t have a choice but to step aside due to illness or other unforeseen circumstances. Either way, you need a plan to ensure that the future of your legacy follows the path that you have in mind.
One of the toughest parts of transition planning is the realization that it has to be done. Nobody likes to think about later-life changes, regardless of whether they’re anticipated or unexpected. But the point of transition planning is to remove as much uncertainty as possible from the equation; by laying the groundwork now, you and your family can have peace of mind knowing that your wishes are documented when the time comes for you to move on.
There are several questions to ask yourself before you start making your plan:
- Do I have a timeframe of when I’d like to slow down and/or retire (for example, a specific age or a set number of years from the present day)?
- How much decision-making do I want to complete ahead of time?
- Would I like my business to continue without me, or would I rather close it and liquidate assets?
- Do I have anyone in mind to by my business if I slow down or retire (a family member, long-time employee/partner, etc.)? Does this person know that he or she is being considered for this responsibility?
- Do I have a health condition that might require me to slow down or retire at some point (either temporarily or permanently)?
- Do I have a realistic idea of what my business is actually worth today?
Once you have this information, recruit a qualified professional to help you create your plan. This process will involve several steps, from setting your objectives and determining the value of your business to establishing transition and making plans for your own financial security at retirement.
A CPA experienced in transition planning will help you set your objectives, develop a transition plan, provide valuation and tax planning services, help you estimate future cash flow and help you with financial planning. A financial advisor may help with the financial plan options and investing your liquid assets. Finally, an attorney will be needed to draft contracts, agreements and other legal documents associated with your transition plan.
During this process you will also want to develop a contingency plan – a Plan B, if you will. While your transition plan will focus on your anticipated future (retirement, for example), we know that life doesn’t always follow our carefully-crafted plan. Death, a financial crisis, family strife and other factors can affect your business; with customers and employees counting on your company, you need a written plan in place to allow others to keep the business going. You should also have written agreements with key employees to incentivize them to stay when you are gone from the business. You can’t control the unexpected, but you can control what happens to your business as a result. Establishing a contingency plan to accommodate such events is another important tool to help maintain the value of your largest asset.
Leaving work that you love is never easy. But there’s no need to fear transition planning; it certainly won’t make that time come any faster. Instead, consider your transition plan an insurance policy that your business – and the family, employees and customers who depend on it – are well cared for when you move on.
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.
Other Posts You Might Like