January 5, 2018 3 minute read
While businesses are changing hands quietly and confidentially via transitions to family members, management buyouts and private company transactions, many are unsure of where to begin and to whom to pass their business along to. KBH provides experienced input on the shareholders’ agreements to prevent future disputes. This can include: the impact of such agreements on business valuation, control and operations of a company, what happens in case of default, death, buyouts, etc.
A few things to think about…
What are your exit options?
You’ll need to transition your business in some way, at some point. You have a few options:
1. Winding up the business is quite possibly the least appealing option. When things such as health issues or death happen, you will need to have a proper plan in place to mitigate the process of selling off all your assets, paying off creditors, distributing any remaining assets to the partners or shareholders and finally, dissolving your business.
2. Transitioning to family members can happen. KBH has a partner who is a certified Family Enterprise Advisor, and is able to assist in the complexities of transitioning your business between family members.
3. Transitioning to a management team is usually the best and most viable option for a lot of companies. However, to be successful there are a few buy-out factors to consider:
- The business has to be big enough to employ a capable management team;
- The knowledge and relationships should be shared with the management team;
- Management should purchase as much as is feasible to have ‘skin in the game.
4. Sell to an outside party if you want options. This allows you to have a greater number of buyers existing outside the party group. This may include anything from entrepreneurs, to other companies and private equity groups. For many, selling to an outside party is attractive as it provides a good alternative. You could consider partial sale options, like a shareholder’s agreement, that will allow you to keep some ownership if you’re having a hard time fully letting go.
Don’t Forget: Succession Planning is a Process
As a business owner, you are probably a responsible, organized and forward-looking person; planning for the succession of your business should be high on the list of things to do. However, that hasn’t helped the majority of business owners from looking ahead and planning their transition.
This is super important for the overall success of your business, and to have an effective succession plan you should put it in place 1-5 years prior to your assumed transition time.
Your business valuation is unique, and having good advisors can simplify the process and help ensure your future is laid out how you want it. Contact us at KBH for assistance throughout this process, we’ll take care of your work-child.