Baby Boomer Business Transitions
By: Susan E.
Wells, Esq., Jaburg &
Wilk, P.C.
As a baby boomer, you may be at the point when you are
considering the next phase of your life. The media repeatedly
reports that baby boomers are redefining aging and
retirement. That's not surprising, as they have redefined
virtually every stage and aspect of American life throughout the
years. Although swimming in uncharted waters can be a
frightening thought, the prospect of starting a new chapter of our
lives, with new opportunities and challenges, can be tremendously
exciting.
Segueing from where you are now to where you want to be takes
significant thought and planning. That may involve
transitioning your business, the culmination of years of hard work
and sacrifice, to your children, your management team or a third
party.
In transitioning your business, typically your key goals would
be:
• To
transition your business to a person or group of people who would
foster the continued success of your business or
• To
maximize the consideration that you receive (and, through wise
legal and tax planning, are able to retain) or
• A
combination of those two goals
However, your goals may differ. It is important to give
some thought to what your goals are, as that may affect
the timing.
Transitioning the business to your children is typically
effected over a longer period of time and may not require the
extent of pre-transaction work that a third-party transaction would
entail. In addition, the current economy's negative impact on
the value of your business may make now a good time to start that
process.
The current economy is not, however, a prime time to sell your
business to your management group or a third party. The
credit crunch has reduced the availability of funds with which to
acquire a business, as well as the number of potential
buyers. In addition, the recent lackluster performance of
some businesses makes it difficult to justify the asking price that
may have been reasonable three years ago. However, now
is a good time to take the strategic steps to prepare your
business for future sale and maximize its value.
Jennifer Arricale, a CPA and the founder of Strategic-Minded
Consulting, LLC, in Scottsdale, Arizona, reviews her clients'
businesses from a prospective buyer's perspective and helps
identify not only problem areas, but recommendations that will
impact value in a positive manner. She encourages business
owners to engage in "early conditioning," meaning gradual,
strategic changes that enhance sustainable future value. She
advises that "Implementing strategic changes is typically a gradual
process and their impact is realized over a period of time.
Buyers also want to see a positive and sustainable trend, typically
three years of consistent improvements. This can all be
accomplished through 'reverse due diligence' which becomes the
checklist for prioritizing value-enhancing changes."
Even taking some simple financial and operational steps may
enhance your credibility, facilitate a sale and increase the value
of your business. Some steps to consider include:
•
Practice good stewardship. Clean up your financial books and
records
•
Change your mindset: As a small business owner focusing on
continuing operations, your mindset may be to decrease profit,
thereby decreasing taxes; in preparation to sell your
business. Your mindset may need to change to increasing
profit, despite an increase in taxes
•
Develop your brand through marketing and an effective, optimized
web presence
•
Refine and institutionalize your business methods and systems
•
Negotiate and document the terms of your arrangements with key
vendors and suppliers
•
Protect key trademarks, domain names and other intellectual
property
Now is a good time to consider the next phase of your life,
including the various options for segueing from owning and
operating your business to whatever that next phase may be.
With creative thought and timely, effective planning, you can
implement now the steps necessary to maximize your
business' value and facilitate the sale process. The best is
yet to come!
About the author: Susan
E. Wells is a partner at the Phoenix law firm of
Jaburg
Wilk. Her corporate and business practice
encompasses all aspects of
business transactions and commercial relationships in
numerous industries, including franchising
. She has extensive experience representing both buyers
and sellers. Susan can be reached at 602.248.1034 or sew@jaburgwilk.com
.
This article is not intended to provide legal advice. This
article only covers United States Law. Always consult an
attorney for legal advice for your particular situation.
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