1. Define your goals. What is your ultimate goal in transitioning your business? Do you plan on funding your retirement through this transition? Is it to leave a legacy? The reason behind your desire to transition will determine how you proceed.
2. Plan & Implement Your Strategies. Create a clear plan as you move forward with the transition. Always be sure you have this plan set before you start so you do not run into confusion while transitioning. Consider the following to include in your strategy as you prepare:
a. Financial. If your goal is towards retirement, how will you be funding it? What will be your compensation as you leave the company? Be sure you highlight financial issues clearly and consult with the appropriate experts to make sure these issues are handled well.
b. Operational. Will you be expected to remain a figure in your company? Will you continue to provide input, or will you fully hand off control to your successor?
c. Human Resources. Always be sure to include your clients, your employees, and anyone of interest about this potential transition. Be clear about your expectations for the transition, such as outlining clear responsibilities for whoever will remain in the company. Will you continue to pursue growth in the company and hire new employees? Or, will you choose to remain the same, or even cut back in size?
3. Form a Transition Team. Business transition is a tricky process, and it is important that you get all of the help you can get. You may come across certain legal, financial, and other unexpected issues that need attention. Before you build your team, however, you should choose your successor so you can build a team around your successor. Alternatively, you can form a team that will pick a successor. Remember, there can only be one successor to prevent complications in the future.
4. Prepare documentation. You need certain information as you prepare for your transition, so be sure that you have all the necessary internal and external documents. Some examples include shareholder agreements, operational agreement, contracts with vendors, and contracts with your landlord.
5. Train the Next Generation. According to a survey by Williams & Preisser identifying reasons for transition failures, over a quarter of transitions fail due to inadequately prepared successors. Introduce your future successor to all your vendors and clients. Personally engage him or her in the daily goings on of your company to familiarize them with operations. Be a personal mentor for the future and ongoing success of the business.