Transition Your Business

Preparing to Let Go

Plan an effective business transition

Smiling businessman taking a break outside
 

Thinking about stepping away from your business can be emotional. Planning to pass it along (or sell it outright) can be stressful. As a result, many small business owners table this decision indefinitely—in fact, more than half of today's small- and medium-sized businesses do not have a succession plan in place.1 And the absence of such a plan can ultimately present problems as the business stumbles forward without a strategy.2

The first stage of planning for transition is simply accepting that such plans need to be formalized. Once that's done, use this checklist to help address the next steps.

1. Consider your top priority

A survey of small business owners found that 41 percent list "future success of the business" as their top priority when transitioning their business. The same number said "getting the best price" is the main goal.3 There can be a big difference between the two: Do you hope your business will continue under your family's leadership for years to come, or are you looking to sell your business to fund a comfortable retirement? The answer may help inform how you'll plan your exit.

2. Picture your retirement

Will your retirement consist of traveling, spending time with family, volunteering (or a combination)? Do you want to spend some time working or consulting with your successors? You and your potential successors should have a clear idea of your planned involvement (or lack thereof) long before you officially hand over the reins.

3. Plan your timetable

To ensure a smooth transition, business owners should prepare at least three years in advance. A longer time horizon may be necessary if a family member or employee will be coming on to run the business. If you choose a successor just weeks or even months before you depart, you won't have sufficient time to transfer the knowledge needed to set him or her up for success.

4. Establish dates for key milestones

Once you've thought about when your transition may take place, consider when you will address three important items. First, you'll determine whether to transfer ownership to an employee or family member or pursue a sale. Next, you'll need to calculate your business's fair market value with the help of your accountant. (Note: The Median Sales Price for businesses sold in the third quarter of 2015 was $185,000; the Median Asking Price was $200,000.4) Finally, you should create a contingency plan for transition that can be activated quickly in the event of an emergency.

5. Revisit your plan as needed

Although you don't want to have one foot out the door if you have years of business leadership ahead of you, your succession plan should always be top of mind and adjusted as goals change and situations evolve. Work with your financial advisors to help you remain on the right track for an effective and successful transition.

Learn what's right for your business

Visit SunTrust's Small Business Best Practices Guide for a straightforward look at best practices for six important areas of financial management, including planning for business transition.

1 "6 Tips For Creating An Effective Succession Plan," April 5, 2017, The Thriving Small Business 

2 "Avoiding this can sink a biz…but doesn't have to," March 15, 2016, CNBC 

3 "Survey Reveals Gap Between Small Business Owner Expectations, Actual Selling Process," June 26, 2015, BizBuySell 

4 "How Much Does Buying A Business Cost?," March 23, 2016, FitSmallBusiness

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.

Related

Investment and Insurance Products:

Are Not FDIC or any other Government Agency Insured   Are Not Bank Guaranteed  May Lose Value 

© 2018 SunTrust Banks, Inc

equal housing logoSunTrust Bank is an Equal Housing Lender. Member FDIC

equal housing logoEqual Housing Lender. SunTrust Mortgage, Inc

SunTrust, SunTrust Mortgage, SunTrust PortfolioView, SunTrust Robinson Humphrey, SunTrust Premier Program, AMC Pinnacle, AMC Premier, Access 3, Signature Advantage Brokerage, Custom Choice Loan and SunTrust SummitView are federally registered service marks of SunTrust Banks, Inc. All other trademarks are the property of their respective owners.

Services provided by the following affiliates of SunTrust Banks, Inc.: Banking products and services are provided by SunTrust Bank, Member FDIC. Trust and investment management services are provided by SunTrust Bank, SunTrust Delaware Trust Company and SunTrust Banks Trust Company (Cayman) Limited. Securities, brokerage accounts and insurance (including annuities) are offered by SunTrust Investment Services, Inc., a SEC registered broker-dealer, member FINRA, SIPC, and a licensed insurance agency. Investment advisory services are offered by SunTrust Advisory Services, Inc., a SEC registered adviser. GFO Advisory Services, LLC is a SEC registered investment adviser that provides investment advisory services to a group of private investment funds and other non-investment advisory services to affiliates. Mortgage products and services are provided by SunTrust Mortgage, Inc.

SunTrust Mortgage, Inc. - NMLS #2915, 901 Semmes Avenue, Richmond, VA 23224, 1-800-634-7928. CA: licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act, IL: Illinois Residential Mortgage Licensee #MB-989, Department of Financial and Professional Regulation, 100 W. Randolph, Suite 900, Chicago, IL 60601, 1-888-473-4858, MA: Mortgage Lender license #-ML-2915, NJ: Mortgage Banker License - New Jersey Department of Banking and Insurance, NY: Licensed Mortgage Banker—NYS Department of Financial Services, and RI: Rhode Island Licensed Lender.

"SunTrust Advisors" may be officers and/or associated persons of the following affiliates of SunTrust Banks, Inc.: SunTrust Bank, our commercial bank, which provides banking, trust and asset management services; SunTrust Investment Services, Inc., a registered broker-dealer, which is a member of FINRA and SIPC, and a licensed insurance agency, and which provides securities, annuities and life insurance products; SunTrust Advisory Services, Inc., a SEC registered investment adviser which provides Investment Advisory services.

SunTrust Private Wealth Management, International Wealth Management, Business Owner Specialty Group, Sports and Entertainment Group, and Legal and Medical Specialty Groups and GenSpring are marketing names used by SunTrust Bank, SunTrust Banks Trust Company (Cayman) Limited, SunTrust Delaware Trust Company, SunTrust Investment Services, Inc., and SunTrust Advisory Services, Inc.

SunTrust Bank and its affiliates do not accept fiduciary responsibility for all banking and investment account types offered. Please consult with your SunTrust representative to determine whether SunTrust and its affiliates have agreed to accept fiduciary responsibility for your account(s) and if you have completed the documentation necessary to establish a fiduciary relationship with SunTrust Bank or an affiliate. Additional information regarding account types and important disclosures may be found at www.suntrust.com/investmentinfo.

SunTrust Robinson Humphrey is the trade name for the corporate and investment banking services of SunTrust Banks, Inc. and its subsidiaries, including SunTrust Robinson Humphrey, Inc., member FINRA and SIPC.