Rick Kozlowski

Rick Kozlowski


(802) 864-5756

rkoz@lisman.com

vermontestateplan.com

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Creating a Transition Plan

Creating a Plan -- The Team Approach

The first, and hardest, step in creating a transition plan is getting started -- defining your goals about retirement and the transition/management of your business (see Getting Started).   In my experience, the best plan -- one that will maximize the value of your business -- is created by a team, professionals with skill sets from several different disciplines who can help you define and implement your goals.   

The right team can enhance the value of your business while avoiding mistakes commonly made by business owners who fail to properly plan.  A good transition team will analyze how the sale/transition of your business can be used to achieve your stated goals.  Once this analysis is complete, the team should create a timeline -- a series of steps that will get you through the transition to your stated objectives.

Assembling a Transition Team

A transition team is comprised of several different types of professionals, each with a different set of skills:

Attorney -- an attorney with experience in the transition can be invaluable in formulating a plan and assembling a team.  My practice is to have an initial meeting with the business owner to generally discuss the owner’s goals.  From there, we work together to refine those goals and explore ways in which to transition the owner’s business (see Types of Transitions).  I then help the owner identify the need for other team members and begin assembling the team.  My role is normally to “quarterback” the team in preparing and implementing the plan.  If the business is sold, I assist in the negotiation and due diligence phases of the sale, and then prepare the documents necessary to protect the owner’s legal and economic interests.  If the business is to be gifted, in whole or in part, I help the business owner structure the gift to minimize or eliminate gift and estate taxes.

Accountant -- in the initial stages of the plan, an accountant with experience in valuing companies can provide the business owner with a realistic look at both the value of the business and its marketability.  As the plan progresses, the accountant can help maximize this value by recommending changes to the way in which the business books expenses, fixes the compensation of the owner and other employees, pays/accrues rent or other costs (such as vehicles), etc.  The accountant can also provide projections of the after-tax proceeds an owner can expect, and suggest ways in which to minimize the tax effects of a sale.  Finally, an accountant can ensure that the business records are in order so that a potential buyer can easily assess the business’ finances. 

Financial Planner -- a good financial planner is a key member of any transition team.  The planner’s role is to help the business owner understand his/her entire financial picture.  How important is the value of the business to the owner’s financial independence?  What rate of return (i.e. what level of investment risk) is necessary to insure that independence for the remainder of the owner’s life?  Can the owner achieve all of his/her financial goals?  The answers to these questions dovetail with the plan for transitioning the business, and will help the owner make solid decisions about that transition.

Business Broker -- a broker is not a necessary member for all transition teams, but for certain businesses employing a broker can help identify hard-to-find buyers for a business.  A good business broker will be able to identify the strengths and weaknesses of a business, and provide a realistic timeline for completing a sale.   



Types of
Transitions


Estate and
Tax
Planning



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