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By Mike Zahn, CIC, Ansay & Associates
Type-A. Entrepreneurial. Driven. Innovative. Tireless. Sound familiar? Contractors are planners by nature. Most company principals have worked their entire professional lives to build and grow their firms, yet for many, the idea of perpetuating their business is always years away. In an era of record valuations, it’s easy to make the assumption that a willing buyer will always be there to take the reins.
The key to successful ownership transition is simply to have a plan! While the main reason behind a transition strategy is to blueprint the future transfer of ownership, it also will respond to pitfalls such as the unexpected death of a key employee or an economic downturn (making those willing buyers much harder to find). Having a plan in place could be the difference between successfully transitioning ownership to a new generation or closing the doors permanently.
A strong perpetuation plan will identify the successor or purchaser (key employees, family or friends, sale to an outside firm/investment company, or merger with another company), the method of conversion, and how that transition will be funded. Important elements of the plan can include, but are not limited to, the following:
The first step to a solid transition plan is determining your ideal outcome and sharing it with key stakeholders and advisors. Even if you plan on running your business for decades to come, share your desires and ideas with those around you! Making sure your team members are aware of and understand your plan is critical, yet often overlooked. Accounting, Legal, Insurance and Surety representatives can all provide valuable insight and help to avoid common pitfalls. They can also assist with starting internal conversations with key employees and future leadership. Like most major business endeavors, the hardest part is getting started!
Mike Zahn is a Commercial Insurance Advisor specializing in Surety Bonding and Property & Casualty Insurance for ABC Member Ansay & Associates. He can be reached at firstname.lastname@example.org.