How to prepare your business for a transition

Entrepreneurs are go-getters by nature, always looking for new ways to grow their business. But whether you are part of a family business or a sole proprietor, there comes a time when you think of leaving. Maybe it’s age. Maybe the weight of routine. Maybe it’s an itch to change careers. Are you ready — and is your business ready — for that change?

No matter the reason, it’s critical to plan your transition as well as you’ve planned the business. You certainly owe it to yourself: How can you maintain your lifestyle and build financial confidence? And you also owe it to the business: Who is the right successor to keep what you’ve built moving forward? Even if you see yourself remaining active for the foreseeable future, it’s never too early to start strategizing succession and transition plans. Here are a few tips to get started.

Get real about your dreams

Maybe you want to start another business. Retire and smell the roses. Maintain a part-time role. Switch careers. You need to think seriously about what you want to do, and when and how you want to accomplish those goals. That information sets the foundation for everything that follows — business succession planning, transition planning, and financial and estate planning.

Ensure the dollars make sense

When first starting the business, you probably calculated, to the last penny, what it would take to open the doors and keep the lights on. Now, do that process in reverse. Eighty percent of business owners believed that income replacement in retirement was important, with 79% reporting they actually understand the concept.¹ So, take the time to turn this understanding into action and run the numbers. Realistically determine how to fund your lifestyle and your goals when you no longer have an owner’s income.

Evaluate your bench

How prepared is your management team for a future without you? Do you need to increase their training? Expose them to different facets of the business? Or even recruit new talent? To help the transition, create a culture of mentorship and start delegating day-to-day responsibilities. Give employees time to grow into their responsibilities with you still around to guide them.

Mentoring the next generation can help your employees with professional and even personal development. It’s a good way not only to help ensure continuity of your business, but also to retain talented staff: 64% of workers say they are likely to leave their employer within a year due to insufficient skills development opportunities.²

Prepare for succession

Four in 5 business owners have some form of financial strategy, yet only 34% of family businesses have a documented and communicated succession plan.^3,4 For the majority without a proper plan in place, there’s risk for your business today and in the future. What if you were to become incapacitated? What if you wanted to change your career?

Succession planning takes time, determination, and motivation. Take the time to understand and define your business, family, and individual goals to develop an effective plan. And remember to review your plan periodically as your goals change over time.

Engage a financial professional

No matter how well you know your end goal, the tax and legacy considerations can be highly complex when transferring ownership of a business. Whether it be investment specialists or insurance professionals, reach out to an experienced financial professional who can review your current situation and provide guidance on various tax-efficient strategies, and help optimize your succession and estate planning.

Transitioning your business can be the beginning of new and great things. With proper preparation, you can help ensure a prosperous future for yourself, your employees, and the business you’ve built.