Research indicates that only a quarter of business owners have a transition plan. And what's the reason for that? One of them is that the manufacturer's franchise agreements generally require the manufacturer to approve the transition, whether it's an internal transition to a family member or employee or the sale to an outside entrepreneur. It's actually a complicated coping situation to think that in the future you, as the owner, will no longer be running things. It also requires an emotional process with family members and employees. Business owners know that all of these unavoidable realities are emerging with transition planning and are therefore delaying the start of the process.
But what if the owner thinks about what would happen to his company if he experienced an unforeseen event that prevented him from working tomorrow or in the near future? A company that is completely dependent on its owner has little value. Every business will need a possible transition and it is up to the owner to decide whether this transition will take place voluntarily or unintentionally. Transition planning is not about moving away from the business, but rather integrating a deeper level of strategy that adds more value to the company. A company must be viable, stable, sustainable, and profitable to be valuable. And transition planning can help determine how to fill the gaps in those requirements.
Transition planning can be initiated with simple steps. A first tip is for the owner to talk to colleagues who made a business transition to discover with them how the process went, what they liked, and what they would have done differently. It's also important to talk to entrepreneurs who received a company after the transition process, which was an upcoming future transition. Then, a conversation with the consultancy that serves the company is still worth it. Financial advisors, lawyers, accountants. The consultant has a good perspective to offer about the situation and how they can plan a transition that meets specific goals.
A transition process can take years, so it's important to start as soon as possible. If the idea is to sell the company, the best time to do so is when it is showing strong profitability. If you're migrating to a family or an employee, you can design a plan that meets your goals. Now, if the intention is not to retire at first, you can still work with reduced tasks after the real transition. Whatever the case, starting the planning process now offers many more options than starting when you're really ready or having an unforeseen event.
In particular when the plan is to transition to a family member, some important items should be highlighted. For example, involving the entire family, both those involved in the business and those not involved. There will be a better understanding of everyone's goals for the transition and this will help avoid tensions, as everyone will understand the reasoning to make certain decisions. Surprises aren't good when it comes to transition planning.
Another point is not to put family members' goals and priorities at the forefront of company planning, as the idea is to add more value to your company, thereby bringing success and profitability to family members. Having independent lawyers and consultants also helps in the process, as family members have different objectives and each one must have their own guidance and assistance throughout the process.
Finally, transitions based on the ages of family members are not recommended. The owner needs to be certain that the successor really wants to take control of the company and needs to ensure that he is ready and well equipped to do so.
The best chances of successful transition are when planning is a long-term strategy.
Contact TATICCA — ALLINIAL GLOBAL, which provides integrated auditing, accounting, tax services, corporate finance, Financial Advisory, Risk Advisory, technology, business consulting and training. For more information, visit www.taticca.com.br or email taticca@taticca.com.br. Our company has professionals with extensive experience in the market and has certified methodologies for carrying out activities.
