Creating a Smooth Transition

Looking to retire from your business? There’s plenty to consider.

There are an estimated 12 million baby boomer business owners in the nation, and according to a study by the Exit Planning Institute, nearly 4 million of them are likely to retire or leave their company within the next decade. Of those, approximately 80% to 90% have their financial assets locked in the business itself and almost half indicated they do not have a transition plan, meaning they don’t know how they are going to get their money out of the business or how it will continue after they step down.

Decisions like these are often difficult and emotional to make and execute, especially when the business owner also must decide whether to sell to a competitor or third party, transfer the business to a family member or employees, or even close the business. In starting the planning process, it’s important to look at internal factors that the company has some level of control over, as well as external factors the company cannot control but to which it must respond.

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For family businesses, the people factor cannot be underestimated. Transition considerations for business owners include management (or who is going to run the business, and is that person/people different from who will own the business); succession (how is the process going to take place); and compensation (how will the current owner extract their financial assets).

Other internal factors include strategic decisions that keep the company competitive while succession is in process, such as investments in technology and other infrastructure.

External factors the company cannot control but must respond to include market conditions, competition, and political and regulatory implications. Retaining skilled labor will always be a focus for companies, as are product/service development and other strategies related to market share and the competitive landscape.

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Economic factors such as election results, market fluctuations and international trade policies also present business challenges and opportunities. Regulatory changes also impact businesses — increasing costs and complexity associated with managing compliance.

Regardless of ownership structure, every business is transitioning, either positively or negatively. As the Exit Planning Institute points out, the stakes are high for family businesses. When businesses do not successfully transition, they risk failure, resulting in job losses and negative impacts to families and communities. It could result in an owner’s life’s work being liquidated for pennies on the dollar.

With so many highly successful family businesses in the Greater New Orleans area, succession is a particularly important topic in our market. So, what should these businesses do to help ensure a successful transition and maximize shareholder value?

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While the long answer is highly complex and personal and takes time to solidify, the short answer is simple: Build a team that can give you good advice and guide you through the process. CPAs, attorneys and financial professionals can help advise you on decisions and present solutions business owners may not have thought about. With a strong focus on your desired outcome, a positive succession plan is not only possible for current owners, but for all stakeholders.


Gina Rachel, CPA, is a director in the P&N Tax Services Group with more than 20 years of public accounting experience. She is the immediate past chair of the Society of Louisiana Certified Public Accountants (LCPA) and past president of the New Orleans Chapter of the LCPA.

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