Typical Areas to Address When Preparing for Sale and in Succession Planning

July 16, 2015 by Thomas A. Pampush, Partner
Typical Areas to Address When Preparing for Sale and in Succession Planning

The following is an excerpt from Ice Miller's Business Transition Strategies to Preserve Wealth Guide, which provides insights on a variety of topics to help ensure a smooth business transition.  

Several key areas of inquiry can drive or detract from value. Typical areas to address, both when preparing for sale and in the context of succession planning, include the following:

  • Does the company have a high customer concentration?
  • Can the company make revenue more predictable by seeking longer-term written agreements?
  • Is there a strong management team? What changes can be made to make the management team more effective?
  • Is the primary accounting personnel
  • appropriate for the company’s current operations and future plans?
  • Are key employees properly incentivized? What can be done to align the interests of key employees and the company?
  • Are there appropriate and enforceable non-competition, non-solicitation and confidentiality agreements in place for employees?
  • Do employees have well-defined roles? What can be done to ensure that employees’ talents are being properly utilized?
  • Does the company have well-documented and defined processes?
  • Does the company have title to critical intellectual property?
  • Are the company’s information systems effective? Is financial reporting well-developed and useful?
Ice Miller - Selling a business, evaluating value of businessVirtually every business can find opportunities for improvement in some of the areas previously noted and in others. By incorporating this type of critical evaluation in the succession planning process, owners and management can drive the overall value and efficiency of the business. This leads to better and more profitable operations in the near term and a smoother and more lucrative transition when the time comes. This can prove incredibly valuable if transition is unexpected, as in the case of the sudden death or disability of the current owner-operator.

While it may seem daunting to try to conduct a value assessment when embarking on succession planning, it helps to realize that these are the same areas that will be examined in some aspects of succession planning anyway. It also helps to understand that succession planning and implementation is a process that extends and evolves over time. Succession planning should be thought of as an exercise designed to drive the value of the business for the owners, not just as a static document used at some far-off date. While getting the basic framework in place relatively early is critical, the ongoing maintenance and implementation of the plan will likely span several years with updates occurring thereafter.

To learn more, download the Business Transition Strategies to Preserve Wealth Guide or contact Tom Pampush. 

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