If you’re thinking about selling or transitioning your business, you need to develop a well thought-out and documented plan. It should include a Deep Discovery and an Enterprise Value Assessment—so you know what is accelerating value and what is holding value back. It is designed to help you to move away from a business on your terms and not those dictated by someone else – while maximizing the after-tax dollars that remain in your pocket.
John was at the country club talking with Tom, a new member. He was surprised to learn that Tom had just sold his distribution company for $10 million. John knew about the business because it was a competitor. Tom’s company was an ordinary but steadily profitable operation. Its product line, historical sales, and earnings were identical to John’s. Both companies were in a highly competitive but expanding industry with plenty of room for growth, innovation, and higher value.
A $6 Million Difference
John also wanted to sell his company and retire. However, he discovered his business’s enterprise value was $4 million, which wouldn’t support his lifestyle throughout retirement. He was shocked to discover Tom’s was worth so much more!
John asked Tom what he had done to prepare his company for sale. Tom explained that he and his management team had worked with an advisor and to develop a comprehensive written strategy for how the company would capitalize on growth and value enhancement opportunities—long before the transition. John realized this was the difference. Not only had he failed to create a plan, but he had continued to rely on his existing customer relationships for growth …
Most Owners Are Ill-Prepared for a Business Transition
Most other business owners find themselves in the same situation as John. According to the Ownership Readiness Survey (performed by the Exit Planning Institute, PNC Bank, and Kent State University), 83% of business owners either do not have a transition plan, only have one in their heads, or haven’t communicated their plan to stakeholders.
The negative effect of not having a written transition plan is staggering—not only for business owners but their families, employees, customers, and suppliers. That is compounded by the number of owners between the ages of 50 and 75, who expect to transition their business in the next five to 15 years. This will put significant pressure on the ability to transition their businesses to the next owner—and get the value they need to retire.
If you’re thinking about selling or transitioning your business, you need to develop a well thought–out and documented plan. It should include a Deep Discovery and an Enterprise Value Assessment—so you know what is accelerating value and what is holding value back. At the same time identify the risks in your business that should be eliminated.
A transition plan considers transfers between family members, sales to a third party, or transfers to members within a company. It’s designed to help owners to move away from a business on their own terms—not those dictated by someone else—while maximizing the after-tax dollars that remain in their pocket. Options are many, and we explore the best option or options for you. There are always one or more options for a company that is transition ready.
Transition planning is not an event but a process. The most successful ones follow very specific steps and reach milestones in a specific order. Birkdale Transition Partners specializes in assisting business owners and their families with this process. Here is the approach we use to help increase their company’s value while creating a better business transition.
Accountability, Increased Value, and a Successful Closing
Business owners can be so focused on day-to-day operations that they don’t plan ahead for their companies’ lives without them—and their lives without their companies. Following Birkdale’s proven process can increase a company’s value before a transition, and help owners get what they want after that happens. We have seen that working with an experienced, independent advisor to lead this process creates an excellent return on investment and pays dividends to everyone involved.
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