Article: Introduction to Strategic Transition Planning

by Andrew Gardner

As everyone is aware, no one lives forever, so regardless of current plans, if you or someone you know owns a business it is important to face the reality that one day it will have a new owner, and that owner will be one of the following: a family member, one or more members of the management team, or a third party. When that transition happens, the ease and financial efficiency with which it takes place will largely result from decisions made in the years leading up to the transition.

The most effective transitions of family and closely held businesses require a plan developed several years in advance of the transition. This process requires a team of professionals, with each member possessing specialized, in-depth knowledge of one of the numerous aspects of the business transition. Strategic Transition Planning (STP) is a formalization of the expertise that Decosimo has provided for decades.

The STP procedure integrates the many disciplines used in business transitions. This integration simplifies the process while still providing the sophistication required.

Our STP team brings the following expertise to the planning:

• Tax planning – Structure the assets in order to minimize tax liabilities.
• Estate planning – Structure the estate to maintain the family’s continuity of assets and minimize tax liabilities.
• Business valuation – Understand the different methods of transitioning your business, the values associated with them, and how to maximize those values.
• Employee incentives – Use incentive plans, non-competes, and other methods to retain key employees and/or transition the business to those employees tax efficiently.
• Entity selection – Choose the best type of entity to suit the owner’s goals, minimize personal exposure to liability, and maximize after-tax benefits to the family.
• Business growth – Obtain the most competitive financing for the business, assess the best method of growth, and maximize value when acquiring other businesses.¹
• Sales or mergers of the business – Prepare the business for sale and conduct a disciplined process designed to maximize value in a sale or merger.¹

Many business owners do not have a clear idea of how or when they will transition their business. One thing we know for sure is only by careful planning can business owners maximize the proceeds from the transaction and minimize tax liabilities. The business transition is one of the most emotional and impassioned financial decisions an owner will ever make. Given the significance of this decision, seasoned professional advice can add significant value to the business owner. However, often, we have seen the tendency is to delay the decision until the last possible moment, which frequently results in significant failure to achieve the maximum value for the stakeholders.

Decosimo’s STP team understands the intricacies of family businesses as well as the complexities of deciding on an appropriate method of transition. If you or someone you know would like to discuss business transition and obtain a better understanding of how to transition the business in a way that maximizes value, please call us in confidence at 800.782.8382.

¹ Corporate finance services are provided through Decosimo Corporate Finance, LLC, member FINRA/SIPC.