Frequently Asked Questions (FAQs)

I am not considering leaving my business for years. Why should I worry about a transition plan now?

You need time to affect the outcome. One key component of a transition plan is building a business that can run without you, thereby protecting your most valuable asset from unplanned events in life. This takes time. 

What is a transition plan?

A comprehensive plan to allow for the orderly transfer of your business, in order to protect the illiquid asset you have built and to create the liquidity which will allow you to realize your goals and dreams. 

Who needs a transition plan?

All owners of a privately held businesses of any size need to consider the issues surrounding a business transition. The larger the business, the more complex the issues will be  but even smaller privately held businesses need to understand the concepts and consider their options.

I already have an estate plan. Haven’t my advisors already considered all of this? 

While we applaud you for doing “estate planning”, your estate plan probably does NOT address who is going to own and run your business. It may simply be a will and/or a simple trust to avoid probate. This is only the beginning. The intricacies of a transition plan will integrate with your estate plan. Remember: your personal and business plans need to integrate to be successful. Large fortunes have been lost due to the lack of comprehensive, holistic planning.

Is this all about insurance?

Good question! Although proper risk management is something that needs to be reviewed and analyzed, that is only a small part of preparing a comprehensive transition plan. There is so much more.

I already have my transition figured out. My son is going to take over the business. Why would I need additional help?

That is terrific. Did you know that the failure rate for hand-offs to the second generation is over 70%?  If you truly want your son to take over the business, it requires work and planning. Also, there are many different ways to transfer the actual ownership of the business. Does gifting make sense? Will you need to take money from the business? How can that be done in the most tax efficient way? How much will you need? Would your son be able to take over today if something happened to you?  

My business suffered so much through the last recession. Can I afford to retire now?

You are not alone. Many business owners that were looking forward to retiring in the past five years feel like they may not have enough equity in the business to last for the rest of their lives. How can you know for sure? Creating a Business Ownership Transition Plan is essential to understanding just how much you need and what your business is worth.

How will my transition be taxed?

Taxes can be one of the largest factors that diminish what your NET is from any kind of transfer. But given enough time, you can minimize the taxes and keep more of your wealth. We all know the saying that “only two things are certain: death and taxes”. Well we can’t do much about the first, but we can help you minimize the second! 

Do I have to sell my business to get out? I worry about my employees. What will happen to them if a new owner buys my company?

This is one of the biggest concerns owners face. After all, their employees are like family and have been with them through good and bad times. They are the heartbeat of the company and business owners feel a sense of obligation to them. The good news is there are ways to protect your employees while also enabling you to diversify your assets.

It sounds like a lot needs to be done. How long is this going to take? 

You are right!  It is a lot. Unfortunately that is why most people put off this very important planning.  Typically, we tell business owners they need to start planning at least two to five years before they want to transition out – even if they want to just semi-retire. We all know how fast time flies, two to five years is the blink of an eye.

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"The real-life examples in
Cashing Out of Your Business
are eye-opening reminders that it’s
not too early to plan. The authors
clearly lay down the steps to have a successful outcome—and what may
happen if not properly done. They
have been a big help in my process
toward retirement."

– Dave Dalpe, Co-Founder,
Victory Mechanical Services, Inc.