What is Business Transition Planning?

Business Transition Planning puts the goals, priorities and strategies in place for a successful transition to the next generation, estate heirs or for the sale of the business to either the management team or external, third parties. Without a clearly defined plan, business owners are leaving their personal and financial future to chance.

Transitioning out of your business is all about setting and reaching goals. Business Transition Planning should be performed in conjunction with or against the backdrop of either or both:

  • Strategic Planning: This process involves developing and measuring strategies and specific initiatives against the vision, goals and objectives of the company. One component may include succession planning (i.e., what comes next) for the business ownership. This is common in private-equity backed firms for which private equity investors have definite redemption periods built into the company operating agreements.
  • Legacy Planning: For the family-owned business, legacy planning involves the transition of the family’s, values, vision, brand and the assets to subsequent generations. Often, the largest asset typically involves a family-owned business.

Why is Business Transition Planning indefinitely deferred into the future or not performed at all?

Most business owners don’t typically think about a Transition or exit process. The reason is quite simple. Whether the business owner built the company from the ground up or bought it and then poured countless amounts of energy and resources into growing the business, the company becomes a large portion of the owner’s identity. The two become inseparably linked.

Consequently, for the business owner, personally separating from the business is not a rationale or comforting thought for the business owner for the following reasons:

  • The business provides the owner with a sense of purpose. Therefore, it is difficult to disconnect oneself from that which gives purpose.
  • The desire to hold onto the company may stem from an owner’s strong belief his work is not yet finished. For example, the owner may feel after riding out a prior recession, he must stay-in the game in order make up lost profit and valuation.
  • The business owner just entered the game and is at the  phase. Therefore, why, during the beginning stages, would he even consider exit since its occurrence is so far in the future?
  • The transition involves a private, family-owned business and the parent-child roles become reversed when the control of the business is transferred from parent to child. Many parents are simply not ready for this dynamic. They may feel “no one can run this better than me” or find it difficult to transfer to their heirs the decision-making process.

Whatever the case, we tend to bury our heads in the sand when it comes to those things that generate feelings of discomfort. Hence, business transition planning can be overlooked or swept under the carpet until the eleventh hour comes and a decision is absolutely necessary.

68% of business owners who plan on exiting or selling their business in the next three years have no formal succession plan1

Why do I need a formal business transition plan? And, why plan early?

Might it surprise you to know the ownership structure of every business will eventually change? For the transition to occur on the owner’s terms, intentional business transition planning must be designed and executed timely. Procrastination is dangerous.

The earlier a business owner prepares for the inevitable transition of his company, the sooner he is prepared for the actual succession. Preparedness translates into a higher enterprise valuation or exit multiple upon the sale or transfer, whether the exit is voluntary (i.e., planned in advanced at a designated time) or involuntary (i.e., quickly sold or transferred due to an unexpected occurrence such as the disability, incapacity, or death of the owner). In other words, transition planning and execution render a higher value for the blood, sweat and tears the existing owner has put in to their life’s work.

CoVergence Group recommends putting a business transition plan in place at least three to five years ahead of a planned business transition. This strategy enables a business to get all the necessary components in place to recognize maximum value. If redemption periods or exit provisions are known well in advance planning can start earlier.

It is important to build the exit strategy for the business as a component of the actual Business Plan and / or a part of the annual Strategic Planning Process. This action ensures its execution as part of the business strategy.

What is the process for transition/exit?

CoVergence Group works with both closely-held businesses as well as diverse ownership groups in their business transition planning. In either case, we design a process aimed to align with your goals and objectives.

For the family-owned or closely held group, our process outlined below helps business owners identify, grow and transfer assets, eliminating the gaps between their current status and desired result. Our expertise is planning — for now and in the future — to ensure you get the most out of your business.


Six-Step Transition Planning Process — Seller or Transferor is Family or Closely-Held Business




  • Discover: Using the Life Evaluator Profile®, this initial discovery phase will help business owners determine when and how to sell or transfer their business and provide a better quality of life by utilizing Life Multiplier Tools to help them get more out of their business and their life.
  • Analyze: Through a comprehensive financial plan, utilizing a Personal Financial Census®, we measure where business owners are currently and how much future cash flow is necessary to provide them with the lifestyle they feel they need and deserve.
  • Maximize: Utilizing The Value Maximizer®, this process outlines the strategies and initiatives required to increase the valuation of the business, thereby eliminating the gap between a company’s current worth and its desired value.
  • Transfer: With The Transfer Process®, this stage is focused on comparing the options and opportunities of transferring ownership through a third-party sale or insider transfer while achieving the business owner’s ultimate goal of a secured financial future apart from the company.
  • Protect: The Generation to Generation® tool enables business owners to have a greater understanding of business continuity, tax ramifications and estate planning strategies, all of which will offer solutions to help provide personal and corporate peace-of-mind.
  • Review: The Wealth Review® involves periodic consultations allowing our team to cover the key elements required to help business owners achieve their objectives. This includes reviews of the implemented strategies, goals assessments and any adaptations they may need to help keep them achieve everything they have envisioned for themselves, their family and their business.

For the diverse ownership group, the same general approach is used; however, each step is not focused on the individual business owner.

If the transition involves a sale of the company, CoVergence Group offers execution expertise through its M&A Advisory services.


Most companies delay Business Transition Planning until confronted by succession challenges. However, it is important to implement well, before the actual succession, Business Transition Planning in order for the ownership to exit on their preferred terms and maximize enterprise value. For family-owned businesses where personal relationships are intertwined with the success of the business the stakes are even higher. At CoVergence Group we have the right professional team with the proven experience to ensure your company transitions well and in accordance with the ownership’s vision.

[1]2012 Spectrem $25 Million Plus Study; 2012 VIP Forum: State of the Business Owner Segment