Transition planning for small business owners
Most business owners have spent most of their life building their business and not so much time figuring out who will take over when it's time to slow down. Transition planning requires careful thought as to who will lead the company you worked so hard to build. Your life’s circumstances will redefine your plans and determine the remaining options left to pursue. As the year draws to a close, this is a prime opportunity for a self evaluation of future goals and aspirations.
Consult early with advisors to determine options
You may already have a team of trusted advisors and will need to call upon them for advice. You and your banker, CPA, attorney, business valuation expert and insurance professional should figure out the value of your business, both to yourself and the outside market, among other things. Here’s a checklistof 32 other important questions to ask. Tax implications are an important topic to consider this year. To learn more about different options for privately held businesses click here. The United States Small Business Administration has guidance here.
Do you have someone in mind to take over? Think about who is waiting in the wings and knows the inside and out of your business, including family members, clients and suppliers. Is now the time to have a conversation with that person? You’ll want to prepare the potential new boss to ensure an orderly transition while retaining and informing your key employees. Before starting the process, confidentiality and non-compete agreements may be necessary to prevent disclosure of trade secrets and sensitive information.
Plan early with estate planning
Establishing a will with your overall intentions is an important step for planning ahead. Speak with your accountant on the potential tax implications. The Internal Revenue Service has information for business owners here about closing your business. Three benefits of advanced estate planning are minimized taxes, creating a legacy and protecting assets according to this article from The Balance website.
Building a transition plan requires careful thought and consideration. As the year comes to a close, think about who you would like to take over your business when you retire or if something unexpected happens. Many small business owners don’t think about their succession or transition plans until they’re ready to retire, but advanced planning can set up your business for future success and protect your legacy once you’re gone.