Strategic advice | November 2024 Balancing your financial needs and your company’s needs during a transition

“Can I afford to step away?”

Asking this question can be the first step in creating a transition plan. And if your post-transition lifestyle depends on the proceeds of a sale—or equity compensation if you’re a non-owner—then your answer may be related to the current and future success of your company.

Before you make any decision about your future, you need a firm grasp on your personal finances, including how much income you’ll need in retirement and its sources.

“At a certain point, the success of your finances intertwines with the success of the company’s finances,” says Russ Sanders, managing director of the Business Transition Advisory Group at Truist. “But for the good of both, you have to prioritize your personal finances because you won’t be able to carry off a first-rate transition if you’re simultaneously making a last-minute scramble to get your own wealth planning in order.”

The intersection of personal and business finances can be tough to navigate, given the web of sometimes-conflicting priorities. As an owner/executive in transition, you’re simultaneously considering the future of your family, the legacy you’ll leave at your company, and the responsibility of leaving your employees a solid plan for stability and growth.

Your Truist relationship manager can coordinate the necessary resources, which will likely include a Truist Wealth advisor. This person will help you draw up and manage a personal wealth plan to help secure your finances ahead of an exit by:

• Budgeting your income and optimizing your retirement and other savings and investment accounts to help maximize your portfolio performance
• Providing tactical advice on how to structure your equity compensation
• Advising you on the valuation process if you’re an owner planning to sell the company
• Implementing strategies to minimize tax burdens
• Taking into account personal estate planning goals and how your transition affects your ability to achieve them

This will free you to focus on helming the company and building a transition plan that secures the prosperity of both you and the business.

Once you’ve made the decision to move on, remember that your company’s ongoing operations are directly tied to both your own legacy and, in many cases, your financial future.

A poorly executed leadership transition can harm your company’s profitability. S&P 1500 companies lose $1 trillion a year in market value due to negative executive transitions, which could devalue your equity stakes or the value the company gets in a sale that helps fund your retirement.¹

“Ensuring the company you’ve helped build is in the strongest position possible when you step away not only secures its legacy but preserves your legacy, reputation, and—when it comes to valuations or equity compensation—your personal wealth,” says Sanders.

Often in a transition, your exit isn’t complete, which makes the case for a strong go-forward plan even more important. For example, perhaps there’s a slot waiting for you on the board of directors, or you’re passing the company on to your daughter. Optimizing the company’s future in these instances isn’t just a matter of finances, but a matter of pride and care.

There are three factors that can help you build an efficient, successful leadership transition plan that prepares you and the company for the future.

1. Start planning as early as possible. “No matter the timetable or circumstances that catalyzed your leadership transition, your succession process needs to be smooth and efficient—and the single best way to achieve that is to begin planning as soon as you can,” says ­­Sanders. “That includes putting together a blueprint for successor selection that also covers unplanned exits that could occur before any scheduled exit date due to you falling ill or being injured.”
2. Build a transition team. “Taking it entirely upon yourself to draw up and execute a transition strategy is an all-too-common error,” says Sanders. “Putting together an expert team of advisors, employees, and colleagues to help design and implement a transition plan increases the chances of a successful handoff.”
3. Streamline and optimize ahead of departure. “So much of preserving your and the company’s legacy comes down to maximizing efficiency ahead of departure,” says Sanders. “Enhancing business operations, optimizing communication, conducting regular and meticulous audits and valuations—these are essential practices at every business lifecycle stage, but they’re particularly important when you’re working to establish business continuity during the handover of executive power.”

With your personal wealth planning implemented and your company’s leadership succession plan in place, your final order of business in the transition planning process is aligning the two. The most important steps in assuring that happens are:

• Keeping your personal planning aligned with your fiduciary responsibilities. To prevent legal liability or reputational damage, make sure that any personal financial plans you make follow all applicable laws and the company’s rule.
• Providing regular updates of your timetable and strategy of succession planning to all relevant stakeholders. This maintains employee morale during and in the lead-up to a transition, creates opportunities for training and promotion that strengthen your operational efficiency, and provides your successor, board members, vendors, investors, and customers with confidence in the company’s ability to maintain continuity.
• Coordinating communication between your transition and wealth planning teams. Establish ongoing contact between the two to coordinate any substantial financial decisions around the vesting or sale of stock and options or the valuation of the company in the event of a sale.

“Working with a single, coordinated team of professional wealth strategists and business transition advisors is the most straightforward way to create plans and timelines to address each of these points,” says Sanders. “And when you’re ready to start that process, we’re ready to step in and help harmonize each aspect of your leadership transition to secure your and your company’s future.”