Business Succession and Exit Planning
Business succession planning is deciding, in advance, who will own and run your company when you step away, how the transfer will be structured and paid for, and how you will replace the income the business provided. The best time to start is five to ten years before you plan to leave, because the options narrow as the date gets closer. Focused Financial Group works with business owners across metro Atlanta on both the business side and the personal side of that transition.
What are the ways to leave a business?
- Transfer to family: a child or relative takes over, by gift, sale or a combination, often over several years.
- Sale to a partner or key employee: frequently funded with a buy-sell agreement, seller financing or a bank loan.
- Sale to an outside buyer: a competitor, a private buyer or an investor group, usually through a business broker or M&A advisor.
- Employee ownership (ESOP): the company is sold to a trust for the employees, in stages or all at once.
- Wind down: the business closes and the assets are sold. Sometimes the right answer, but usually the lowest value.
What should be in a succession plan?
A target date and a backup plan if something happens sooner; the chosen successor and how that person will be prepared; an estimate of the business's value and what drives it; the structure and funding of the transfer; what happens to key employees and customer relationships; and the owner's personal plan for income, taxes and estate after the sale.
Why start five to ten years out?
Buyers pay for businesses that run without the owner, have clean financials and have a management team in place. Building those takes years. Early planning also leaves time to fund a buyout with insurance while owners are insurable, to use multi-year gifting or sale strategies with family, and to work with your CPA on the tax treatment of the sale before the terms are set.
How does the sale affect the owner personally?
For most owners the business is the largest asset and the main source of income, so the exit is also a retirement plan. The questions are what the proceeds need to support, how to replace benefits the business paid for (health coverage, retirement contributions, a vehicle), and how the estate plan should treat the new liquidity. We build that personal plan alongside the business plan.
What if the owner dies or becomes disabled first?
That is the scenario a buy-sell agreement and key person coverage are for. Succession planning covers the planned exit; those documents cover the unplanned one. Most owners need both.
How Focused Financial Group helps
We start with an informal business valuation and a conversation about the owner's goals, then coordinate with your attorney, CPA and, when a sale is involved, a business broker or M&A advisor. We handle the funding side (insurance, retirement plans, the owner's personal plan) and review the plan each year. We do not provide legal or tax advice.
Talk with us
Call 770-250-7588 or use the Contact Us page. The first conversation is about where you want to be in five years.
This material is for general information only and is not legal or tax advice. An informal business valuation is a planning estimate, not a formal appraisal.