How to set goals that increase your business’s value before you exit

It’s estimated that 3 million small business owners in the U.S. will sell in the next five years. Yet one-third of those owners don’t have a business or retirement plan to prepare for the transition.
“That’s a million businesses that are really vulnerable to debt, disability, economic downturn, competitors, external and internal strife, and more,” says Deborah F. Graver, high net worth asset development officer and chief compliance officer at Fragasso Financial Advisors. “If they don’t pay attention to it, everything they worked so hard to build could disappear, and then all their dreams of retirement are gone.”
If you fail to plan, you can end up unprepared to sell, she says. And if you have to have a fire sale, you won’t be able to convert what you’ve built into a liquidity event that really represents the true value of your small or midsize company.
Smart Business spoke with Graver about what to consider when you’re seeking to transition your business to the right people at the right time, and for the right price.
What’s the first step to planning a business transition?
First, sit down with an adviser to describe what you want to achieve. You need to work with a financial professional who can help you envision and plan for the transition.
An experienced, knowledgeable financial adviser can help create a transition plan in coordination with your CPA and attorney. While planning for the sale, your adviser should also work with you to create a customized personal plan to ensure financial security during your lifetime and beyond.
When do you need to get started?
Start planning for the transition at least five years out. Planning with foresight gives you time to prepare yourself and your business for the change. Proper business valuations on a routine basis are also vitally important.
What’s critical to prepare internally?
Make sure you have the right people in place. Strengthen your leadership structure, considering long-term goals and the intended succession plan. Are the managers’, directors’ and other employees’ strengths properly aligned with the roles they play in operating the business? Would changes in key employees improve operating efficiency?
If you are unsure of how to evaluate that and restructure where needed, or if you’re simply too close to the subject matter, consider hiring a consultant. A business transition specialist can help interview key stakeholders to determine strengths and weaknesses in the organization and provide guidance on strategic changes.
How else can you get ready?
Create a written business continuity plan, in the event of the death or disability of yourself or key employees. Various types of insurance can also help guard the business against loss of key personnel and protect the future of the company and personal wealth. For example, a key person life insurance policy can help protect the business from the adverse effects of losing essential personnel, and a more comprehensive buy/sell agreement can help provide greater financial protection for business continuity.
What can you do to make the company financially stronger before the transition?
Review the company’s fringe benefits, including the retirement plan. A quality retirement plan is key for retention and ranks as a top priority for job candidates. Many employer-sponsored plans also offer significant tax advantages to the company. A properly structured retirement plan helps to round out a solid business, making it more attractive to potential suitors, which can help you retire with a larger nest egg.
In addition, clean up the balance sheet. Managing assets and liabilities properly with disciplined accounting practices shows prudent financial control systems are in place. Employ cash management and debt reduction strategies to maximize value well in advance of an intended exit.

Planning a business transition can be like another full-time job. That’s why it’s critical to find a financial adviser who can help translate your vision into a plan, help execute the plan on that vision and work systematically with you to get the right people and processes in place. If you haven’t worked with an adviser before, or feel you’ve outgrown your current adviser, schedule an appointment with a seasoned professional more suitable given this stage in your life.

Insights Wealth Management is brought to you by Fragasso Financial Advisors