Business owners tend to cultivate strong relationships with their accountant. When a business owner makes the decision to transition leadership of their business, their accountant, or trusted advisor, has the unique opportunity to bring guidance and objectivity to an often-emotional process.
An advisor will encourage a healthy amount of communication and help deter escalation and emotional heartache during leadership transitions. They will bring creative solutions to financial decisions, help identify potential business and financial statement risks, as well as bring an outside perspective without the emotional tie to the business.
Having as much time as possible to prepare for your transition is key to success. Your accountant should be brought into the conversation early as there may be critical financial and tax considerations to be throughout the process.
Step 1: Find out what really matters to you
Talk to the people closest to you (family and friends) and identify your true desires for the next stage for you and your business. Visualize what role you want to play in the process and the role you see yourself playing in the future. Your goal might be monetary, or it might be more emotional and fueled by the legacy you’ll be leaving behind. Maybe you want to retire in the Bahamas, or maybe you want to maintain a board position.
Depending on your goals, your accountant can also help you consider creative exit strategies, such as leveraged buyouts, tax deferred installment sales, phased stock sales, or employee stock ownership plan (ESOP).
Step 2: Pencil out your ideal situation
If you could make the perfect transition, what would it look like? Define your role, your timeline and even your compensation. This will give you an outline to refer to when it comes time to approach your prospective leader(s) and announce your intentions for the business.
Step 3: Identifying skill and passion
Approach your ideal candidate, and remember that they may have different goals. While you may have the ideal candidate in mind, that person might not initially have the intention or passion to take over and successfully lead the business. Perhaps there is an internal manager who needs leadership training and development before assuming the role.
This step will likely take some time as your candidate will need to possess both the skillset and the passion to make a successful transition. Having a minimum of three years to invest in mentoring, skills training and preparation is ideal when it comes to setting the candidate up for success.
Step 4: Piecing it together
At some point, your candidate should be taking over more day-to-day and operational responsibilities. Now is a good time to announce the transition plan and present your exit strategy to the business. If you’re accepting outside capital or investments, make sure there is cultural alignment in order to maintain the trust and integrity of your employees and business partners.
Transitioning your accountant
Even if your advisor has been with you for generations, that relationship might not be the best choice for your business going forward. Generations grow up with different perceptions, life values, and ways of managing and leading a business.
For example, business owners in their 40s generally have goals to retire earlier than the baby boomer generation. The same generational differences apply to the accountants that have become that business owner’s trusted advisor. It’s important to allow your successors the freedom to build their own bonds and to encourage them to find an accountant that shares their unique perceptions and values.Allowing each party to have their advisor will give a sense of comfort and confidence that they have someone on their side and representing their financial interests.
Growing a business is much like raising a child. It takes ingenuity, hard work, consistent performance and lots of communication to reach your goals and turn your vision into a reality. Passing that vision to the next generation is both mentally and emotionally difficult, but having the right advisors on your side can help you prepare and execute a plan that will bring you, your successor, and your business future success.