April 22, 2021

Planning Towards a Smooth Transition

By Jim Bruner, CFP®, MPAS®, CPWA®, CEPA®

Eight Steps for a Business Transition

As a business owner, you’ve worked hard to build your business. But what about the day when you might want to walk away from it all? Business transition planning is perhaps one of the most complex tasks a business owner will encounter. Many owners have a substantial portion of their family wealth invested in the business, a complexity that requires broader financial planning strategies to address retirement and estate planning needs.

If you lack a comprehensive plan to pass on your business, now is the time to give serious thought to a formal business transition plan. A well-crafted transition plan identifies a long-term strategy that can inform short-term decisions.

Improve the value of your business
When the time comes to sell a business, many deals collapse during the buyer’s due diligence when problems come to light. So, start cleaning things up before it becomes an issue for a buyer.

As you look to improve the value of your business, think about what factors a prospective buyer will place the most value on. What will drive value for a buyer in the future? Will the business continue to operate effectively and grow if you are no longer at the helm? What roadblocks should be addressed now, instead of closer to the sale?

Reducing business risk is a top priority in a proactive transition strategy. When your business is perceived as a solid opportunity, it may create a competitive buyer environment, increase value, improve negotiation and deal terms, and minimize the time to close the sale.

Preparing for the future sale of your business
Here are eight action steps to help get your business market-ready.

  1. Get your business documentation in order. Start by making sure all your business operation and process documentation is up to date. Formalize and extend key customer and vendor contracts and confirm that well-documented processes and procedures are in place.
  1. Organize your financial statements. Make sure your financial record keeping and reporting are transparent and easy to evaluate. As you think about making your business more professional, look for clear lines of separation between personal and business expenses.
  1. Develop formal strategic plans. Start with your business’ core competencies. What is your long-term vision? What is your strategy to diversify your customer base? How will you continue to grow and expand?

Have a strategic plan for each key area of your business, such as sales, marketing, operations, technology, finance and legal.  Know how your business is valued in your industry and look to boost the key metrics.  

  1. Create business succession and contingency plans. Prepare formal succession plans and communicate them to your leadership team. Decisions around who takes over and how can be essential to the survival of your business.
  1. See that legal records are in good order. Are your legal contracts in order? Are your employee procedures and agreements solid, with a change in control in place? Are there any environmental, compliance or regulatory issues that need your attention? Is there a chance to extend lease agreements or take a closer look at real estate holdings? Is your intellectual property adequately protected?
  1. Secure your leadership team. Be certain you have a leadership team that is ready for a smooth transition when the time comes. The next owner of your business will look for a strong leadership team that will stay with the business through the transition period or longer.
  1. Consider a formal board of directors with outside members. Establish an advisory council or a formal board of directors. Look to include outside members who own or have owned successful private companies.
  1. Minimize your business’s reliance on you. Many business owners are justifiably proud to be the leading driver of sales and revenue. However, to truly drive a growth strategy, you need to make the business less reliant on you.

Each business is different and preparing for a transition is a complex process. Start thinking about how you can maximize the value of your business today.

Jim Bruner, CFP®, MPAS®, CPWA®, CEPA®, is a financial advisor at UBS in Indian Wells with over 30 years in the financial services industry. He joined UBS in 2007 and has helped to build a comprehensive wealth management practice, serving professionals, entrepreneurs, retirees and their families locally with financial planning at its core. He is also on the board of the Palm Springs International Film Festival and a member of the Childhelp Palm Desert chapter. He has taught corporate finance at Cal State San Bernardino’s Palm Desert location. 

Source: UBS Business Owner Insights Report, September 2018

This article has been written and provided by UBS Financial Services Inc. for use by its Financial Advisors.

UBS Financial Services Inc. and its affiliates do not provide legal or tax advice. Clients should consult with their legal and tax advisors regarding their personal circumstances and before they invest or implement. This report is provided for informational and educational purposes only. Providing you with this information is not to be considered a solicitation on our part with respect to the purchase or sale of any securities, investments, strategies or products that may be mentioned, including estate planning strategies. In addition, the information is current as of the date indicated and is subject to change without notice.

As a firm providing wealth management services to clients, UBS Financial Services Inc. offers investment advisory services in its capacity as an SEC-registered investment adviser and brokerage services in its capacity as an SEC-registered broker-dealer. Investment advisory services and brokerage services are separate and distinct, differ in material ways and are governed by different laws and separate arrangements. It is important that clients understand the ways in which we conduct business, that they carefully read the agreements and disclosures that we provide to them about the products or services we offer. For more information, please review the PDF document at ubs.com /relationshipsummary.

© UBS 2021. All rights reserved. The key symbol and UBS are among the registered and unregistered trademarks of UBS. UBS Financial Services Inc.is a subsidiary of UBS AG. Member FINRA/SIPC.  Review code: IS2100285 Exp: 1/31/22

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