Transition Signs

Every business has signs that indicate when to consider an exit or succession. The problem is since selling or succession is often a once in a lifetime event, often those signs are overlooked. Below are some of the more common signs transition planning may be needed.

  1. Age. This is the biggest sign because age is significant variable. A healthy seventy-year old may want to work another decade or more. Conversely a healthy fifty-year old may want to be done in the next two years. One sign though is to look at any owner over sixty. Even that healthy sixty- year old needs to prepare for the possibility of an exit. You need to ensure you can make the business liquid at the highest value possible and ensure you protect the wealth you have accumulated.
  2. Health. Health can turn at any time and it may not be the owner’s health. It could a partner, spouse or other family member. In addition, if the owner does have health issues and it takes him or her out of the business for any period of time that could be enough to erode the company’s performance and diminish the value of the business.
  3. Family. If you have family in the business and they want to be part of it ongoing there may be a long training period needed. In addition, there are sometimes difficult decisions as to who will be in charge or perhaps even a need to bring in outside leadership.
  4. Regulatory. If your business may be facing regulatory changes does it make sense to consider selling before you need to invest in new processes, people or equipment? Someone who may be thinking about getting out in five years may need to reconsider their exit timeline before making significant investments to be in alignment with new requirements.
  5. Technology. Even if the business does not have regulatory needs, they may need to upgrade technology or equipment in order to remain competitive or because the useful life of current items have or are nearing expiration.
  6. Financials. Performance may be unusually high. Is this a time to consider exiting to get a higher value? Or, you may see a downturn coming. Perhaps your business is driven by interest rates, trade issues or tariffs, or some other factor you cannot control, but one that materially impacts your business. The financial climate may alter your decision to stay or begin an exit strategy.