Business Transition Explained – First Installment

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What it means for you and those you know…

I am excited to announce that I recently completed B2B CFO’s excellent certification program and am now a Certified Business Transition Expert! Our organization takes great pride in bringing lasting value to our clients through our role as long-term trusted business advisors. This certification rounds out my expertise for that role as business owners I work with contemplate the future for their businesses and their personal lives.

A Series on Business Transition…

So beyond self-congratulations, I’d like to take some time in the next several installments of my newsletter to explain what the certification means, what business transition is and how it can be of benefit to someone you know.

First Installment…and quickly!

If you’ve hung in there with me through the videos and remember my pledge in earlier newsletters to “keep it short”, I’d like to offer my first comments on Business Transition.

Business Transition Explained…It’s Exit Planning, Right?

Exit planning is hot topic for aging baby-boomers and anyone else who has built or acquired a successful business. Here at B2B CFO we feel the term “exit” is not appropriate for many of our clients. Rather we prefer to speak to our clients about business transition because the fact is that no two business owners are at same point in the evolution of their business and personal lives.

Discussions regarding business transition should begin with a thoughtful, personal and strategic discussion of what the goals, limitations and opportunities are for the business transition. Let’s take a look at a short list of common considerations, which I have grouped by 4 factors; Employment, Lifestyle, Successor Planning and Wealth Planning.

Employment Factors

Let’s face it, short of a desire for an outright and immediate sale/exit, many small and medium-sized business owners will remain the organization’s key employee for some time. The reasons for this vary based on each individual’s desires, wants & needs. Here are some key questions:

  •  How long do I plan/need to work in the business?
  • Does being employed in the business mean what it has meant since founding or acquiring the business?
  • Can I have a decreasingly responsible role in the business over time to:
    • Enjoy more free time?
    • Groom successors, whether employees or family members?
    • Pursue other business, charitable or personal interest?

Lifestyle Factors

Many businesses are an extension of an owner’s lifestyle. These can take on several material and psychological forms. Materially speaking; wages, benefits and various perquisites are part of the lifestyle the owner enjoys from the finances of the business. Passion, enjoyment of work, camaraderie with employees, vendors and customers and feelings of pride and accomplishment can be psychological benefits. Lifestyle questions regarding the need for business transition planning may include:

  • I enjoy my business and plan to die here. Do I need to plan?
  • At what point in the plan do I consider a reduction of material benefits?
  • Can I continue to enjoy the psychological benefits during (and possibly after) transition?

Successor Planning Factors

You will need a successor. Period. Even if your plan is to die at your desk! Here are some important question regarding succession:

  • Do I want to pass the business on to family or employees?
  • Are my family or employees qualified and interested in becoming owners?
  • Can I maximize my valuation if sold to a 3rd party?
  • Which 3rd party buyer would be the best fit for my goals?
  • How do I find a suitable successor?

 Wealth Planning Factors

The difference between the business transition cash value realized in the business transition and the need for adequate post-transition personal wealth is what we at B2B CFO refer to as the “Gap”. The Gap varies greatly depending on the unique circumstances of each business owner. For example:

  • The Gap is wide – Simply stated, “All the eggs are in the business basket”. In other words, the owner’s wealth is primarily found in the value of the business.
  • The Gap is narrowing – This describes cases where the business owner has been able to accumulate wealth outside of the business and has an increasing awareness of the potential and realistic cash flows from a planned business transition.
  • The Gap is closed – This case represent the optimal case where the business owner has a clear idea of their wealth plan in terms of both personal wealth and a realistic view of business transition cash flows.

B2B CFO recognizes the need for Gap planning in order to maximize the results of any business transition. We employ a team approach with the business owners’ wealth advisors, insurance agents, attorneys, CPAs and other business advisors to round out the best business transition plan.

Our Game Plan

We employ our 6 Step Game Plan to work with business owners to bridge the Gap. Other benefits or our services include the following:

Greater Peace of Mind * Reduced Stress * Increased Company Value  More Free Time * Reduced Cash Flow Worries
Increased Personal Wealth * Security for Love Ones

Just the Surface…for Now.

I’ve just touched the surface regarding business transition with this article. I look forward to continuing this series and hope you enjoy the content.

Of course, feel free to contact me if you want more information on this and any other service B2B CFO has to offer.

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