Business Life Cycles and Transitions

Business life cycles

Written by Arthur Raak

August 29, 2017

Business life cycles can closely mirror our own progression through life, with one difference. If a succession plan is in place, a business can keep thriving after a business owner has transitioned into retirement or passes away.

While businesses always need to plan ahead, for start-up, growth, and perhaps mergers, planning for transition or succession may be the most important. Here are some abbreviated elements of transition planning.

  • Start early. At least five years before you expect to transition or sell, increase your focus on elements of the business that will position you to obtain the maximum value and give your successor the best chance for continued success. Consider debt, cash flow and key performance ratios that can be managed in advance to make your business more attractive.
  • Prepare the next generation of leaders. Whether you intend family members or employees to take over the business, have a written succession plan. The plan should detail what to expect and what is expected of them. This will minimize conflicts. Begin to pass on your knowledge and contacts so that your business doesn’t lose value because you exit.
  • Be realistic about value. Watch that tax-motivated transactions and reporting don’t reduce your true value in the eyes of a buyer. Setting the right value will help your successor be successful.
  • Plan for retirement. Plan for income, gift and estate taxes, along with future cash flow, to make sure retirement is everything you dreamed about.

Our hands-on and caring professionals have experience to help you capitalize on every step of your business cycle. We work with businesses of all sizes, and provide some of our highest-value services to businesses that are starting up, expanding, or transitioning to the next generation.

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Arthur Raak
As a partner in the Rochester office of Hawkins Ash CPAs, I focus on small business consulting with an emphasis on transition planning and implementation. I also assist clients with income and estate tax planning and preparation.

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