Transitioning your business is one of the most critical and life-changing decisions you'll make as a business owner. If you handle the process well, you will be helping not only yourself, your team, and your business but also the future owner. It will save everyone time, money, and any chaos.
At The Alternative Board, we have helped hundreds of thousands of businesses navigate the rocky waters of business transition through strategic consulting services, including a rock solid exit strategy and transition plan. So we turned to our TAB members for advice on carrying out a seamless business transition.
Here are 3 ways to Successfully Transition Your Business To New Owners:
#1. Plan ahead, be selective, and set expectations:
Planning, setting expectations, and being selective are the keys to building a foundation for the successful transfer of your business to new ownership.
You must ask questions and be comfortable with the answers before you can make your choice. This will avoid seller's remorse, arguably one of the worst feelings a business owner could experience because they are emotionally tied to their business.
As a result of those emotional ties, examining the process, delineating your boundaries, and setting expectations will avoid delays and unnecessary —perhaps even hasty —emotional choices.
Choosing your path and staying within those boundaries will allow for a proper, educated, and smooth transfer of your business. Ask yourself these questions to set the stage for a successful transition:
- What will I do next? Your business was your baby —and now you are without it. Knowing your plan after the transfer will help you through the discomfort of the process and the myriad emotions you are likely to experience.
- Can I get my asking price? This is a brilliant question, and it is usually best to see how a professional determines an expectation gap when it comes to pricing. Eliminating any chance of a surprise in the price will settle you into a proper negotiation.
- How much money do I need? This may come from the selling price or savings. If you don't already have a good understanding of your finances, now is the time to pay attention so you can go through this transition without any remorse. Avoiding surprises at the beginning of the process will foster a smoother transition and greater peace of mind.
4. What do I truly want? It sounds simple; however, you are about to embark on the next chapter of your life. This entails a bit of soul searching and a huge reality check. Will you be alright on your next journey —will your family be okay as you move on? This needs to be a critical driving force as you work through the process. Knowing your driving force is empowering.
In my personal experience, it has always paid to "write it down." Document what you aspire for, what you need, and what you can do. Once it's written, you can look at it, review it, reflect on it, and grow from it.
During the process, pay particular attention to the following points:
- Make sure this is what you want —for your business, your family, and your future.
- Make sure you will get what you need —financially for you and the good of your business going forward.
- Also, make sure you are comfortable with your next steps. Your business was your baby —are you comfortable and secure with the next path on which you've sent your business?
Once you have taken the above steps and choose to transfer your business, follow through and stay true to your choices.
#2. Whatever the reasons for the transition —make sure you plan ahead of time.
Always be strategic and plan ahead of time. You should never allow external factors to decide for you. Here are seven ways to exit your business.
- Pass it down to family members.
- Arrange a buyout by your managers.
- Convert it to an ERISA Trust for employees (ESOP).
- Sell it to an unrelated third party.
- Arrange a sale or merger with a competitor, customer, or vendor.
- Close it down.
- Allow market forces and life events, like declining sales, disinterest, disaster, divorce, disagreement among owners, distraction, debt, employee defection, disease, disability, or death, to decide it for you.
#3. Make your transition high quality and short.
During negotiations, take time to plan out your exit with the buyers. A well-planned transition pays big dividends. Be realistic about what you can and can't do. Long shifts rarely work well.
Here are some of the reasons:
- The new owners will do things differently (as they should), and you probably won't like it.
- It's tough for the team and clients to move on while you're still there.
It would help if you did an excellent, high-quality job of transitioning the relationships (internal and external) to the new owners. The trust needs to be transitioned in addition to the business and technical details.
Map out a reasonable timeline, expectations, and responsibilities for both you and the new owners. Revisit the plan often because things will change as you go along.