Thinking of Eventually Transitioning From Your Business?
Start now!
What is the right time for a successful business owner to start putting a formal business succession in place? The answer is deceptively simple — as soon as you start thinking about making a transition. The answer depends on multiple factors that are exceedingly complex. The bottom line is that you should view it much like that of a parent wondering when is the best time to start saving for a child's college education... the sooner the better.
Where to Start?
Every business owner has different goals and objectives. Where some owners may not have any desire to leave their businesses, others may want to free themselves up for travel or spend time with grandchildren. Outside influences such as economic conditions and health considerations also impact the business owner's plans, as do family dynamics. The most important consideration is making the decision that's right for you.
Determining the right age at which to step down — or step back — is one of the most difficult personal choices in the life of a business owner. There is no universally correct solution that will work for everyone. When you know the time is right, you must make sure that you have made proper preparations, both for your life after the business and for the life of the business after you. It is vital to seek professional assistance in all aspects of the transition.
How to Prepare for Your Life After the Business
Meet these three steps to ensure that you to make the transition out of the business, when the time is right for you.
Financial concerns. Will you be comfortable enough to live life the way you wish? At a minimum, you should be sure that you've done the analysis necessary to ensure that even with the most conservative estimates, your cash flow will not be an issue. The nearer you are to your retirement the more meaningful your analysis. Further, there are numerous considerations with respect to retirement plan money that may have to be rolled out of your company-sponsored plan. Many of the choices are determined by your age, so be sure to avoid the many traps for the unwary. If you are selling the business, consider whether there are strategies available to help minimize the tax burden of the sale. If you are gifting your business interests to your family, be sure to do so as efficiently as possible.
Non-financial concerns. What will you do to keep yourself occupied? More than one business owner has found him- or herself feeling suddenly lost and uncertain upon retirement. At a minimum, you should have a plan with respect to which hobbies or activities you are going to pursue. Often, people find themselves longing to "stay in the game" and get tremendous satisfaction from volunteering as a resource for would-be entrepreneurs in their communities. On the other hand, your experience and expertise may allow you to generate a significant income by consulting. Finding the path that is most appropriate for you is yet another important factor in the entire process.
Vital planning. You should do everything in your power to ensure that the next generation of leaders of your business is adequately prepared when the time comes for them to take over the reins.
The worst thing you can do to your successors is to thrust business ownership responsibility upon them without adequate warning or preparation. The better prepared your successors are, the greater the likelihood that your company will continue to thrive.
Be aware of the psychology involved with your announcement. You are taking action that will have an immeasurable impact — both upon those who are chosen as your successors and those who are not chosen. Don't lose sight of the fact that the change will influence everyone in the company — not just the new management team — and that people tend to be afraid of change. The more seamless the transition, the easier it will be on everyone.
So, the time to start putting the formal plan in place could very well be today, while you are still quite some time from making the transition. That way you can ride off into the sunset knowing that there will be many more bright sunrises in the future of your company.