You’ve worked hard to build your business and put it in a place where it’s successful. But suppose you want your business to outlast you and continue delivering value long after you’ve left the stage. In that case, you need to take the time to build a sound business transition plan.
Your business transition is one of the most critical stages in your financial career and your business life. Some business owners make the mistake of believing they can simply put their company on the market, sign the dotted line, and walk away with a substantial return.
A business transition is much more complex than that, and many business owners want more than just a big payday. Some maintain an emotional investment in their business and want to see their company succeed even after they’re gone. Others wish to safeguard the employees’ jobs and livelihoods that contributed to the company’s success over the years. Still, others feel that leaving a good plan in place is the right way to exit the company.
Different Types of Transition Plans
There are numerous ways to transfer ownership of your business and finding the right one will depend on your goals and circumstances. Three of the most common include:
• Sale to a New Owner: Under this model, owners sell the entirety of their business to an outside investor or entrepreneur who will take over their existing ownership responsibilities. When considering candidates for a sale, you should first identify the post-transition priorities for your business to ensure the future owner will operate the company in line with your vision.
• Transfer to a Family Member: Oftentimes, small business owners want to keep their business in the family, passing it down to a child, niece, nephew, or other relatives when the time comes for them to move on. Ideally, this type of transition is a longer-term process that involves identifying a suitable successor and grooming them to move into ownership (or management) over time.
• Sale to Employees: Existing owners might choose to sell the company to a current employee (or a group of employees), or they could open the sale of the company to the entire employee base in the form of shareholdings. Employee-owned companies are an emerging and popular form of business ownership. An employee stock ownership plan (ESOP) is a common way to complete this form of sale.
Cathay Bank provides business owners with the financial services and products they need to facilitate a successful transition and ensure the long-term viability of their company. Contact our team to start a conversation at (800) 922-8429
