Are You Thinking About An Exit Strategy or Ownership Change in 2021?
2021-02-22 | by Gene Reynolds
Small business owners often overlook one important factor in the long-term success of their business: who will eventually take over the company?
Perhaps you have in mind a family member, a key employee who has been groomed for your role, or a high potential employee who might be slightly off the radar. Regardless of who the expected successor is, it’s important to have an effective succession plan in place to ensure a smooth transition process to the next owner.
We know it’s difficult to think about your exit strategy or a change in ownership amongst other competing priorities. You want to get this right, but you also need to stay focused on current challenges running the business.
That’s why it’s important to take time to understand how to navigate the tricky maze of succession planning so that you can ensure the longevity of your company and create a clear transition plan that is supported by key people in your family and your company.
Where to Start with a Small Business Transition Plan
One of the most common concerns that we hear from business owners is not knowing where to start with a transition plan. Perhaps your primary roadblock is thinking about what would happen when you start down the path of considering an exit strategy. You don’t want rumors to spread like wildfire or company leaders to start jockeying for position to be your successor instead of focusing on their current role guiding the company.
Oftentimes, it’s best to work with an outside entity first, such as a CPA firm. A third party can play an objective role by asking questions, gaining an understanding of your long-term thinking, and help you take the appropriate preliminary steps to map out your small business transition plan.
Through conversations with a CPA firm, you can feel comfortable with the chosen path you want to go down:
- Keep the business in the family by transitioning to a family member.
- Tap an internal company leader to be the next owner of the business.
- Recruit an external leader to take over the company.
- Or, map out a plan to sell the company to an outside party.
A CPA firm can help you think clearly about this critical first step in the process so that you can gain confidence in your decision-making process. Then, you can take the next important step of communicating the transition plan to key stakeholders.
The Importance of Communication During a Transition
In a small business, there are so many interconnected relationships among family members, company leaders, and other individuals in key positions. That’s why it’s important to start with a clear plan about your exit strategy so that you can clearly and effectively communicate to employees about what’s going to happen next.
People will naturally start to wonder about their future and how things will change, so be sure to focus on communicating the business plan so that you can keep everyone rowing the boat in the same direction.
If you see this transition happening in 2021, then you need to quickly start communicating the change and what employees can expect this year. However, if you anticipate this change happening years from now, then you can start to lay the groundwork now so that your team has ample time to prepare for the change.
Additionally, you want to take appropriate steps to start building up your roster to support the company after the transition is complete. The bench strength of your company will be key to long-term success following your exit.
Keys to Building an Effective Small Business Roster
One of the most important steps in mapping out your transition plan is reviewing what the roster will look like after your exit.
For example, if the plan is for an internal leader to take over the company, then you need to have a plan to fill that person’s current role after your exit. This will also create a trickle-down effect trying to fill each successive role that is affected by the change.
What can you do now to prepare for this dramatic shift in the roster?
- Identify key employees to fill leadership roles.
- Implement a career development program to help each employee advance.
- Provide training and coaching on necessary skill sets to help employees close gaps.
- Emphasize knowledge transfer from current leaders to future leaders.
- Continue to refine your training and development program until it’s time to transition.
As you can see, there is a lot of work to do before the ownership transition. Replacement planning requires a committed effort to developing key employees who will be instrumental in growing the company well after your time in the ownership seat.
Work with Reynolds & Associates to Support Your Exit Strategy
Let’s take the time to build the appropriate transition plan for your business. Through our conversations with you, we can help you start down the path of transitioning to the next owner.
As we advance down this path, we can also walk you through complex issues such as tax implications, retirement planning, business restructuring, and how to maximize the value of your business.
Let’s get started by finding out more about your business goals ensuring the long-term success of the company. We help business owners in Houston and across Texas find the right path forward during this change.
Call us at 713-316-4560 to get started on succession planning. Or, you can email info@ReynoldsCPAFirm.com or fill out our website contact form. We look forward to hearing from you!
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