Planning is essential for effective execution of any worthwhile endeavor. It doesn’t matter if you expect to sell to a competitor, strategic buyer, financial buyer, employee or family member – an effective plan will dramatically increase your chances of achieving your business transition goals.
If planning were easy, you would already have your business transition plan written and ready to pull off the shelf when it was time to move on. Unfortunately, most business owners face common challenges in developing their business transition plan:
Lack of Clarity
One of the biggest reasons to create a transition plan is to gain clarity on your business transition goals. A lack of clarity increases your transition risks, often leading to chaos when it is time to transition and sub-optimal results.
Business transition clarity is difficult to do on your own. A trusted advisor can ask you the rights questions and help you work through often difficult answers. We find helping business owners address the emotional aspects of their business transition planning as valuable as the more tangible aspects.
Lack of Urgency
It’s easy to put off transition planning for another day. Most business owners have mixed emotions when thinking about retiring, a disability or even their early death. Putting transition planning off for another day simply surrenders your control, so start thinking about what happens if you fail to plan.
No one wants to leave their customers, employees, family members or spouse with a business in chaos. A business transition plan enables the people you care about to calmly execute your desires in the event of your untimely demise. Hopefully, they get to see you execute your business transition when you are ready, rather than due to a life crisis.
Lack of Humility
No one is going to run your business exactly like you run your business. If you are waiting to find someone who is “just like you,” you’ll continue to push off your transition planning for another day.
A better approach is to describe the characteristics and skills you are looking if you are transitioning internally or selling your business to an external buyer.
Lack of Strategy
If you are looking at your business transition plan as a set of tasks on your to-do lists, you could end up with all the “to do’s” but no cohesive, overall strategy. You’ll accomplish more and more effectively with structured approach to planning your business transition.
What are your transition goals? What are you willing to consider – and what will you never do? What’s your best possible scenario? What will you do if an opportunity – or a crisis – arises sooner? A solid business transition plan will enable you to seize those opportunities and respond effectively.
Lack of Realistic Valuation
While it’s easy to use a “rule of thumb” approach to establishing a value for your business, the price of your business isn’t determined only by your financial performance.
Conversely, a formal valuation can be an unnecessary expense, especially when you aren’t planning to transition for several years.
The truth is in the middle. Our Phase I Business Estate Plan ensures effective due diligence of internal and external factors that impact your price are considered in establishing a realistic valuation for your business.
Lack of Discipline
Once you have developed your business transition plan, you’ll need to establish a process for updating your plan periodically. Although annual updates may not be necessary, an annual review will ensure all you need to do is update information rather than recreate it, unless there are material changes in your business.
Arizona Business Transitions specializes in helping business owners prepare for their business transition, whether they need to transition their business now or are looking ahead two, five or more years. Let’s address the lack of clarity, urgency, humility, strategy, realistic valuation and discipline for your business transition together!
Founder & Chief Executive Officer
Alex has advised hundreds of small businesses on strategic planning, business development and all areas of corporate finance, specializing in helping business owners sell their business or raise capital for growth and acquisition. In his work with business owners, he has found many have done very little planning for an eventual transition away from the day to day operations or out of the business altogether.
As a native Arizonan, his passion is working with and advising local companies and helping business owners gain comfort in their eventual retirement and have the knowledge that when the time comes to sell the business they have a well designed plan of action already in hand, a good idea of what that business is worth, and who the next owner will be. He founded Arizona Business Transitions to assist business owners plan for an exit or transition, even if that transition is not on the horizon.
Alex graduated from Brophy College Preparatory and later graduated from DePauw University with a degree in Economics and Management. He is a member of the Tempe Diablos Charities and lives in Tempe with his wife Trish and two boys, 10 year old Carter and 7 year old Aidan.