Apple Growth Partners

Planning Ahead – Designing Your Succession Plan

Before you start, choose your destination

Article #2 in the Succession Planning series

By Toby Kaye, CPA/ABV | Manager, Tax

Toby Kaye, CPA/ABV

I had discussed in the initial article about listing your desired exit outcomes in priority order during the planning phase. Any additional time spent on this phase clarifying your goals will pay dividends throughout the process. 

What is a practical way to identify and document these desired outcomes? Consider the following questions. If you can answer them all, you will have a framework to get started on your strategy and specific tactics.

  1. Am I still excited every morning to come to work to build this company? Am I still putting my energy and abilities into growing the company? Am I taking advantage of the opportunities that I see in the market?
  2. How long would I prefer to continue owning the business? Do I want a gradual transfer of ownership or a one-time purchase? Is there external (ex. competition, technology change) or internal (loss of key customer) that will force me to act quicker?
  3. Would I agree to be involved in the business after exit if desired by the buyer or transferee? Are there processes and people in place for the business to run smoothly for a new owner without my involvement?
  4. Who would I prefer to be the new owner of the company? Family? Unrelated buyer? Employees? Would the transfer to this new owner make sense financially and continue the success of the business?
  5. Why would a new owner find my business valuable? What is the new owner acquiring in the transaction?
  6. How much cash do I need from the business when I exit? Consider your current and future needs and aspirations. For example, retirement, debt repayment, annual living expenses, new investment opportunities, vacation home, children’s education, long term care insurance, etc.
  7. How much of the cash needs to be paid at settlement compared to over a period of several years?
  8. Do I have competent advisors to help me get to the destination? Do I trust my lawyer/accountant/insurance/investment professional to make suggestions for my best interest?

The answers to these questions will guide the strategy. A quality advisor can adapt the strategy to meet your prioritized goals regardless of your business’ entity type. 

The next few articles in the series will use case studies to illustrate how a change in your desired destination will require a transformation in strategy. Contact me to discuss how to start planning your business exit.

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