How Long Will It Take To Transition Your Business To Others?

3 min read · 7 years ago


transition advance monopoly

The common answer that business owners give when they are asked when they plan to transition out of their business is five years and then they proceed to postpone their planning for four years as if they have plenty of time.

What they don’t know is that most owners need at least three to five years, once their plan is in place, to successfully transfer their business, especially if it is to an internal buyer. Why three to five years?

It takes time to:

  1. Build value in your business – Most businesses are not worth enough to satisfy the owner’s financial needs for the rest of their life and it takes time to increase the profits and improve the quality of the business to drive a higher value.
  2. Find the right buyer – If you decide to sell externally, you will need to prepare your company for sale and cast a wide net to create some competition or, you are going to leave money on the table.  Once you find a potential acquirer, consummating a deal can take another year.
  3. Groom your successor – If you decide to sell internally, you may or may not have a successor already on your team.  If you don’t, it can take a year just to find the right candidate and then they have to learn your business.  If you already have the right person, it can take a few years to groom them to take over.  There is a lot to learn in order to successfully run a business and experience is the best teacher of all.
  4. Minimize your taxes and fees – Most owners do not understand how much they will pay in advisory fees and how their business transfer will be taxed.  Planning in advance will allow owners take action to minimize their taxes and maximize their net proceeds.
  5. Increase net worth outside the business – The vast majority of business owners need the wealth trapped inside their business in order to fund the rest of their lives yet their business value is not high enough.  This means owners will need to save more money outside the business before they can transition.  Planning in advance will allow owners to calculate how much they need, how much to save, and how much they need to grow their business.
  6. Prepare yourself for the transition – It is common for owners’ identities to become completely intertwined with the business.  It takes time to figure out what they they want to do when the business does not occupy all of their time.

Five years goes by very quickly.  Owners that develop a business ownership transition plan will have a far better outcome than those who don’t.  The plan takes only few months but execution can take 3 to 5 years.

The next time someone asks you when you will start transitioning your business, we hope you will be able to say that you have a plan, you’ve already started executing it and it’s going very well!

Click here to download our guide to external transitions.

[Photo Credit: Michael Josh Villanueva; Flickr]

This article was syndicated from Business 2 Community: How Long Will It Take To Transition Your Business To Others?

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