Surveys indicate that only a quarter of business owners have a transition plan. And what's the reason for that? One is that the manufacturer's franchise agreements often mandate that the manufacturer approve the transition, whether it's an internal transition for a family member or employee, or the sale to an outside business owner. It's actually a complicated situation to face, to think that in the future you as the owner will no longer be running things. It also requires an emotional process with family members and staff. Business owners know that all these inevitable realities are emerging with transition planning and therefore delaying the start of the process.
But what if the owner thinks about what would happen to his company if he experienced an unforeseen event that prevented him from working tomorrow or in the near future? A company completely dependent on its owner has little value. Every business will need an eventual transition and it is up to the owner to decide whether this transition will occur voluntarily or involuntarily. Transition planning is not about moving away from the business, but about integrating a deeper level of strategy that adds more value to the company. A business must be viable, stable, sustainable and profitable to be valuable. And transition planning can help determine how to fill gaps in these requirements.
Transition planning can be started with simple measures. A first tip is for the owner to talk to colleagues who have made a business transition, to find out with them how the process was, what they liked and what they would have done differently. It's also important to talk to business owners who took over a company after the transition process, what a future transition was. Afterwards, it is still worth a conversation with the consultancy that serves the company. Financial advisors, lawyers, accountants. The consultant has a good perspective to offer on the situation and how they can plan a transition that meets specific goals.
A transition process can take years, so it's important to start as soon as possible. If the idea is to sell the company, the best time to do so is when it is demonstrating strong profitability. If you're migrating for family or an employee, you can come up with a plan that meets the goals. Now, if the intention is not to retire at first, you can still, after the actual transition, work with reduced tasks. Whatever the case, starting the planning process now gives you far more options than starting when you're really ready or experiencing an unforeseen event.
In particular when the plan is to transition a family member, some important items should be highlighted. For example, involving the whole family, both those involved in the business and those not involved. There will be a better understanding of everyone's goals for the transition and this will help to avoid tensions as everyone will understand the rationale for making certain decisions. Surprises are no good when it comes to transition planning.
Another point is not to put family members' goals and priorities ahead of company planning, as the idea is to add more value to your company, and with that to bring family members success and profitability. Having independent lawyers and consultants also helps with the process as family members have different goals and each should have their own guidance and assistance throughout the process.
Finally, we do not recommend transitions based on the ages of family members. The owner needs to be certain that the successor really wants to take control of the company and needs to make sure he is ready and well equipped to do so.
The best chances of successful transition are when planning is a long-term strategy.
Get in touch with TATICCA – ALLINIAL GLOBAL, which provides integrated auditing, accounting, tax, corporate finance, financial advisor, risk advisory, technology, business consulting and training. PFor more information, visit www.taticca.com.br or e-mail taticca@taticca.com.br. Our company has professionals with extensive experience in the market and has certified methodologies for carrying out activities.