Family business owners often think the internal transfer process will be an easy one and the pieces will just fall into place but usually find out quickly this is not the case. Working with an advisor who is uniquely trained in business ownership transfers can help guide you through the process of developing and implementing a successful internal transition plan. An advisor can help you to:

1. Determine if an internal transition is the best for your business: Probably one of the most important things to keep in mind is to make sure this is the right decision for you, your family, and your business. Often in a family business, especially one that is multigenerational, it is just assumed that the next generation will want to take over the business. This isn’t always the case and may cause trouble down the road. You should make sure your successors want to take over the business and are able, in terms of knowledge and skills, to take over and manage the business.

2. Consider the financial consequences of internal sales: Ownership transition planning process should always begin with identifying the goals of the current owner(s). We believe those goals are paramount in determining the best strategy. Internal sales may net you less money than external sales. You need to be in good shape financially before taking this path, and you should analyze your financial situation before even considering an internal transfer. A business transition advisor can help determine if you are financially ready for an internal transfer.

3. Provide impartial guidance: Many owners who are considering choosing a successor from inside their families find it helpful to bring in an outside advisor who is impartial and has no real stake in the outcome. Internal transfers can often come with legacy baggage, which include business issues and/or emotional turmoil; it can be helpful to have an unbiased advisor who is focused on the bigger picture.

4. Assemble and quarterback your transition team: Having the proper team in place to advise you during the transition process is crucial for success. You want to make sure they have the experience and knowledge to advise you through this complex process. For an internal sale, you will most likely need the following advisors:

  • Transition mentor
  • CPA
  • Corporate and estate attorneys

You need to make sure you have assembled a team of advisors that will work collaboratively in an integrated and comprehensive manner to assist you in achieving your desired outcome. And as with any team, you want someone to coordinate the team to make sure they are working to ensure all work is completed on time and your goals and objectives are paramount.

5. Provide guidance for successors: While the business owner knows what goes into the day-to-day and long-term management of the company, sometimes it can be difficult to see all of the necessary components for educating your successor. It may be beneficial to work with an outside advisor or group of advisors to assist with this critical step. An outside advisor or advisory board can offer an unemotional and unbiased view to help the successor achieve success.

You have worked hard to build a valuable business and close-knit family, and you want to make sure your exit strategy and succession plan is beneficial for both. Secure the proper business transition advisors and do the planning well in advance of the transition in order to ensure that the future of your largest asset and your family are secure! For more information, see also: How an Exit Planner Can Help You Transition Your Family Business.

We've developed the Business Transition Academy to provide business owners with a wealth of information to get them prepared for a business transition. Review our testimonials and contact us today to learn how we can help you make informed decisions to achieve superior results.


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