How to begin the business transfer process

Whether you're an entrepreneur thinking about passing on the torch or a successor, you have the same goal: transferring the business successfully so it can live on and grow. Make sure you have the help you need every step of the way.

Whether you're an entrepreneur thinking about passing on the torch or a successor, you have the same goal: transferring the business successfully so it can live on and grow. Transferring your business is a complicated, time-consuming process you will go through just once in your life, so there's no room for error!

Having solid support will give you the confidence you need to complete the process. If you don't get help, you may jeopardize your financial security, family assets and business. With the right help, you'll get the outside support and information you need to transfer your business successfully.

One step at a time

It can take 2 to 5 years to transfer a business, sometimes more. That's why it is crucial to have a sound plan in place with clear, realistic timetables so you don't lose sight of your goal.

The beginning of the transfer process can be likened to taking a snapshot of your personal, economic, family and social situation. Examining each of these aspects will help you determine how prepared you are for this monumental undertaking and help you take the right action.

Who, when and how?

To take stock of your current situation, you need to ask yourself the right questions and answer them truthfully. These questions may make you uncomfortable, emotional or pensive, but you need to be honest with yourself so the process works as designed.

  • Have I discussed my business transfer plans openly and honestly with my family and associates?
  • Do I know what role I want to play until I leave? Have I decided when I will leave?
  • Do I have concrete plans for my retirement or new life? Do I know what my financial needs are for this next stage of my life?
  • Do I feel financially secure?
  • Do I know what my business needs to live on?
  • What about tax planning? Do I have the best possible plan? Have I minimized my future tax burden?
  • Am I positive that my assets will be protected?
  • Do I feel surrounded by the right people? Do I know who can help me start transferring my business?

These questions will help you determine how comfortable you are with the business transfer process and help you identify your main concerns. You can then decide what action to take to address these concerns and take the first steps toward transferring your business.

Go for it!

The next step is to write out and execute your transfer plan. Base your plan on frank discussions with your family and the specialists who will help you throughout the process.

Here are the main parts of a transfer plan:

  • Strategic plan

    A business's strategic plan is an essential tool for transferors and buyers as well as advisors and lenders. It should include the business's vision, mission, values, strategies and financial objectives. It is critical to the business's continued development. It helps you look ahead and set development priorities for your business.

  • Team of expert advisors

    Make a list of all the advisors who know your business and its human and personal implications. Use this list to put together a team to make your business transfer a group effort. It is imperative that your partners be willing participants who understand what the process entails.

  • Ownership transfer plan

    You must choose the share allotment that will optimize the business's development and create attractive conditions of sale and purchase for your successor. You will also need to write a tax and estate plan to ensure that your heirs receive their fair share and that you can enjoy a worry-free retirement.

  • Transfer financing plan

    To finance your business transfer, you and the buyer will have to agree on terms. The financing package may include a variety of financing sources depending on the products available, the business's characteristics and the investment projects outlined in the strategic plan.

  • Transfer of power plan

    Power is one of the most difficult things to give up for owner-managers. The intimate knowledge you have of your business is another form of power. As an owner, you need to set aside time to talk with your successor to impart your strategic knowledge of the business and the specifics of its market, customers, suppliers, backers, technologies, competition, etc. You must make your successor accountable for the transfer of power and democratically agree on a transfer timetable.

  • Succession training plan

    The purpose of this plan is to help your successor acquire all the personal, technical, administrative and management skills they need to fully assume management duties and run the business. To put together this plan, you'll have to think about and identify the skills, qualities and training your successor will need.

  • Communication framework

    You will need to set up a management committee, steering committee or family council to discuss how the transfer is going. These can serve as decision-making and conflict resolution bodies as well. You must also have a plan for communicating with the business's employees and partners.

Remember that good planning is the key to a successful transfer. But before you can make a good plan, you must first surround yourself with the right people. Seek out experts who have lots of experience helping entrepreneurs transfer their businesses. Put their extensive knowledge to work for you. Business transfer specialists understand the importance of both the economic and human aspects of transfers, so they can help you take those considerations into account and meet your needs and those of your successor.