Whether it happens by design or by default, the ownership status of every business will transition and change. Those transitions that happen by design (continual, thoughtful planning) will be smooth and rewarding. Those that happen by default will be a mess.
There are over 5.5 million family businesses in the United States and they employ roughly 63% of the workforce . The ownership of every one of these businesses will eventually changes hands. Planning appropriately for these transitions makes complete sense.
Business succession planning is the process of evaluating all of the financial implications of selling your business. This planning is designed to help owners better control future outcomes for the sale of their business, gain knowledge about the pros and cons of every decision to be made and better understand the impact those decisions will have on the business, themselves, their families and their community.
It doesn’t matter what stage of the business lifecycle you are in. You have to plan for the unexpected. Succession plans need time to develop and mature. Businesses will evolve over time. A proper plan will start early and be regularly reviewed and evaluated, which in turn can help your business prosper and give you a better chance to sell at the most opportune time. If you’re in your late-50’s or early-60’s, you need to get your planning started immediately. If you’re over age 65, it is critical to expedite your planning and make it your number one priority.
The biggest mistake business owners make is trying to create a transition plan on their own. This reminds me of a Native American proverb “If you want to go fast go alone but if you want to go far go together”. Every business owner needs objective advice and guidance to integrate their business with their personal financial plan. Regardless of whether you decide to keep or sell your business, you need a financial plan to compare cash flow, liquidity, diversification, taxes and risk profile. To accomplish this and help you make informed choices, you need to assemble a team of experienced professionals led by a transition specialist (i.e. a Certified Exit Planning Advisor or CEPA).
The goal of effective transition planning is financial confidence for the business owner and control over who benefits from their lifetime of hard work.
 Source: PNC Financial Services.