Sponsored Content | Brand Spotlight Partner What's This?

Succession Planning: It's Never Too Early to Start Thinking About the Future of Your Business Transitioning a business can be highly complex. With so many moving parts, leveraging an advisory professional can help you make a smooth transition while providing good value to you.

G-Stock Studio | Shutterstock

Your company is often your most valuable asset. Someday, you'll want to transfer it to a suitable successor or buyer while enhancing the value you receive. This starts with a succession plan. Whether you transfer ownership of your company to a family member, an employee, or as part of a third-party sale or merger, having a plan in place and teaming with advisory professionals can help it run smoothly.

Even though you may be tempted to hold off, your succession plan should be part of your business strategy from the beginning. "You want to start your business with the end in mind," explains Lisa Horn, Principal, Owner Transition Services at CLA, which offers wealth advisory, digital, audit, tax, outsourcing, and consulting services. "If your business is always prepared for transition, whether internal or external, you're running a solid business."

Having a robust business plan can also help you prepare for unforeseen circumstances. Entrepreneurs know that some things are beyond their control — including when it's time to consider transitioning their business. The transition of a company can happen earlier than anticipated due to one of the five Ds: death, disability, divorce, disagreement, and distress. Having a succession plan as part of your business strategy helps you prepare for the unknown. The sooner you work with someone you have confidence in and surround yourself with an advisory team, the more likely you are to succeed.

"We want the day an owner transitions to be a huge celebration. And for that to happen, owners need to assess themselves around three areas: business readiness, personal financial readiness, and personal readiness," Horn says.

RELATED: Driving a Business Strategy that Accomplishes the Owner's Personal Goals (Webinar)

How to know when you've established business readiness.

The more "transferrable value" the better off an owner will be when transitioning a business. "The value of a business that's actually transferrable is everything the owner doesn't do," explains Jeff Servais, Principal, Transaction Services at CLA. In addition to a diverse customer base, owners can establish transferrable value by surrounding themselves with a stellar management team and employees.

Ask yourself these questions to determine if you've established business readiness:

  • What's the performance of your business like?
  • What's the growth potential?
  • Are you overly dependent on any customers, suppliers, or team members?
  • What's your cash flow like?
  • Do you have reoccurring revenue?
  • What's your unique value proposition?
  • How is customer satisfaction?
  • What is the strength of your leadership?

How to know when you've established personal financial readiness.

Personal financial readiness should be in place before you transfer your business. You'll need a holistic personal financial plan and confidence that you can sustain your desired lifestyle after you transition out of the business.

You can achieve this by setting financial goals to know why you're saving money, creating a budget for when you leave the company, planning for taxes and retirement, and managing debt.

How to know when you're ready, personally.

Don't underestimate how emotional a transition can be for you as business owner. Even considering stepping away from a company you created and invested so much time in can be intimidating. Often the business is your identity.

Personal readiness derives from having peace of mind that your family and business will be taken care of, you have a life after transition plan for yourself that provides purpose, and you have what you need to live your desired lifestyle.

The importance of selecting professional transition advisors.

When finding the right advisors to aid in the succession process, select a team that's well established in transferring ownership of a business.

Consultants like those at CLA are industry focused and take a holistic approach to your situation. Their team of professional owner transition advisors works alongside you to understand your specific personal and business needs and goals.

Transferring ownership of your company is something you'll typically only do once in your lifetime, and you don't need to do it alone. Transitioning your business should be the end goal of creating one, and it should be the best day of your life. It's essential to have a qualified team that knows what they're doing. Someone that understands your entire picture so you can have peace of mind while you prepare to transfer ownership and when you're onto the next act of your life.

Click here to learn more about how CLA can help with succession planning and help set up the process for success right from the start.

Register now for a free webinar, Transitioning Your Business on Your Terms, happening live on October 18.