Business Transition

4 Steps for a Smooth Business Transition

Use this list ahead of a leadership change

4 Steps for a Smooth Business Transition

One of the best ways to maximize the long-term value of your company is to design a strategy for the day you leave, at least a year in advance, but preferably even earlier. To do that, entrepreneurs need a transition plan: a living document that identifies business and personal goals, sets milestones, is regularly revisited and is clearly communicated to appropriate stakeholders.

As you develop a transition plan for your business, here are four critical steps to take:

1. Assemble a unified team

Treat the transition process like it’s the launch of a business unit: First, assemble your team, including industry experts such as a CPA, attorney, financial advisor, marketing expert and insurance agent. Then schedule periodic meetings to consult with this team so it can address how to handle critical business functions and concerns leading up to your exit.

2. Organize your financial documents

When transitioning your business to new leadership, thorough documentation is a must. Be prepared to offer up a minimum of five years of financial documents, audited financials for at least three years and personal financial information. You’ll also want vendor and customer lists and contracts, procedural documents, legal documents and an overview of your intellectual property rights and assets.

3. Develop a forecast for prospective buyers

To a new owner, your forecast is the investment—especially when it outlines potential changes across your services, products and customer base. Developing data-driven projections for the growth and development of the business can help the new owner or prospective buyer understand the value of the company, and helps guide immediate operations so the staff has a clear path to success.

4. Update IT systems

Faulty infrastructure is easy to get used to and impossible to get around when seeking a new owner. Preparing for a successful transition means replacing custom or obsolete systems in favor of industry-standard hardware and software. Savvy prospective owners want an IT platform on which they can effortlessly expand the company.

Your banker can help you create a transition team and compile your financial records in advance, so share your plans early to ensure you’re doing everything in your power to keep the business running smoothly, even after your exit.

This content does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.


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