Transitioning at the top

Preparing for a transition

Truist helps owners prepare themselves and their businesses by following a business transition roadmap that covers three phases.

• Phase 1: Laying the foundation for transition
• Phase 2: Leaving the business
• Phase 3: Managing post-transition

Calfo offers these suggestions for a successful transition.

1. Start with the end in mind. Once an offer is on the table, owners often focus on the transaction instead of the broader impact on their business and personal plans. Envisioning life after the business allows an owner to set goals for themselves and their business. The owner can use these goals to determine if an offer is right for them and their company. A long-term strategy starts by answering open-ended questions like:
   • Who do I want to run the business?
   • What is my time frame for transition?
   • If I’m going to the office every day, what will I be doing?
   • How much do I need to support my family post-transition? Where is the money going to come from?

2. Think about mergers and acquisitions (M&A) strategically. Many middle-market companies have little M&A experience. According to Preparing for Major Business Transition from The National Center for the Middle Market, 63% of owners had no M&A experience within the past 5 years, and 67% had no experience with ownership changes either. Half of those going through a business transition had some negative outcome, which is hardly a surprise given their inexperience with M&A and business sales.^{Disclosure 1}

   Entrepreneurs are often surprised by how hard it is to sell a business. Getting up to speed on the sales process, responding to due diligence, and keeping the company performing at its best to keep the sales price high is no easy task, even for the most accomplished leader.

3. Plan the steps required. Planning for a future transition means taking on a number of pressing issues. Ninety-eight percent of those who start planning 3-4 years in advance are satisfied with their transition results as opposed to 33% who start planning less than a year in advance.^{Disclosure 1}

   Transition preparation often leads to a higher business valuation and more funds available where owners need them most, after the sale. Whether you sell the business or keep it in the family, boosting performance and having your personal affairs in order leads to a winning result.

4. Assemble an experienced deal team. Align yourself with experienced accounting, legal, and financial advisors who can give you the right advice for the best possible outcome.

   “Experienced advisors are essential when an owner encounters a buyer like a private equity firm,” Calfo said. “When inexperienced business owners deal with experienced buyers, a tremendous amount of value transfers from the seller to the buyer.”

5. Plan for life post-transaction. Whether it’s spending more time with family, getting involved in the community, pursuing a lifelong interest, or even starting another business, having something to look forward to after leaving the business eases the transition for the owner. Many owners don’t know what they want to do after the transition.

   Though buyers might be eager, and retirement may be beckoning, an owner without a transition plan will be disappointed by even the most tempting offer. Proper planning and experienced advisors can help an owner create a post-transition game plan and have the cash on hand to support it. That’s what makes a successful transition.