Exit Strategy: Transitioning Your Business to a New Owner
By Amber Ferrie, CPA, ABV, CFF, CM & AA and Chad Flanagan, CPA, ABV
While each business owner chases success in his or her own unique way, there are some things nearly all owners have in common. Hard work, determination, a vision of what could be, and the will to make it happen—these are the stock and trade of anyone who starts a business.
There’s also another common factor that binds together all business owners: The need to someday transition your business to its next owner.
For some, the decision will come early in the life of their business, and they will be on to the next big thing. For others, it may be among the last decisions they make as an owner. Regardless of how you reach this milestone—whether it’s retirement or a buyer knocking at the door—an understanding of the transition process will go a long way to making this event smooth and amicable.
Why do I need to start planning for exit early?
One of the first questions you’ll ask when you transition your business is who your potential buyers are, and it may not be as easy as you think.
It happens all the time. Mr. Doe starts a widget business and pours his heart and soul into it. After years of developing relationships, assembling a workforce, creating a brand and achieving success, he’s ready to transition to retirement. In fact, he wants to move to Florida in the next six months. Mr. Doe consults a transaction advisor, who has a fairly standard list of questions to learn more about Mr. Doe and his situation.
“Do you have any family members interested in the business?” the transaction advisor asks.
“No,” Mr. Doe says.
“Do you have any key employees who have the interest or skill set to buy and run the business?”
Mr. Doe shrugs. “I have had some over the years, but they have moved on to other opportunities.”
“Do you have good management depth?”
“Not really, everything runs through me,”
Mr. Doe says. “I call all the shots.”
The transaction advisor looks thoughtfully at Mr. Doe and leans forward. “Do you think we can find a buyer to invest in this business if you aren’t a part of it anymore? If you own all the customer relationships, know-how, technical expertise, and the brand is you, how do we sell this?”
Read the entire article at EideBailly: https://www.eidebailly.com/insights/exit-strategy-transition-business-new-owner