Succession Planning for Business Owners: Insights on Your Role and Your Company’s Transferable Value

succession planning

Succession Planning for Business Owners: Insights on Your Role and Your Company’s Transferable Value

succession planning

In business, an inflection point is synonymous with a turning point, or a time of significant change. When these points occur, and throughout the life of the business, the owner holds the responsibility for approaching and evolving in a manner that’s best-suited to their personal needs and to the success of the company. That responsibility includes determining and implementing any necessary changes to their own role in the company ahead of inflection points. I often remind my clients that it’s also about increasing transferable value to keep their company’s success, goals, and growth on track, even after they exit the company.  

Defining and Changing Your Role as Business Owner

According to Business Enterprise Institute, Inc. (BEI), a trusted advisory network for exit planning, there are 3 approaches most often used by business owners in terms of their role in the business. In working with my clients, I have noted these same approaches across the different stages of the exit planning process as well. 

Hands-on/Head-Down Approach –  Business owners should avoid this type of approach wherein the owner takes on every business decision and has a hand in nearly every part of business operations. If this role never evolves, these owners are often forced to exit their businesses. When inflection points such as industry maturation or a slow in revenue occur, these owners, for lack of any other option, may be forced to exit regardless of inopportune timing affecting themselves or the business.  

Hands-off/Head-Down Approach – In this approach, business owners delegate some of the less critical responsibilities to capable employees and members of management. By doing so, they are ensuring future options are open and time is available now to set the company up for success in the event that an exit is desired or has become the best option at an inflection point. 

Hands-off/Head-up Approach – Business owners using this approach delegate as much responsibility as possible. Additionally, they employ an advisory team that helps them grow their business to the next level ahead and through inflection points, creating the best suite of options for themselves and for the success of the company following their exit. These business owners are focused less on day-to-day and more on the big picture and increasing transferable value.

Increasing Transferable Value

As the business owner, you should promote continued growth for a number of reasons, including increasing transferable value. If your company has transferable value, it means company success is not dependent on you as the owner, and a transition would cause minimal disruption to cash flow. Aside from assigning yourself the appropriate role, I want to look at a few additional ways for business owners to increase their business’s transferable value. 

Retaining Key Employees – When motivated, key employees can increase productivity, business value, and transferable value. Key employees generally include the 8-10 top players among your management team. How can you keep them happy and productive? By using the right incentive plans. 

These incentives include plans for non-qualified deferred compensation, stock appreciation rights, phantom stock, stock bonus, stock option, and stock purchase, as well as current and deferred cash bonuses. Even if plans have relatively lengthy vesting schedules, they can be a great motivational tool because the right plan allows your employees to recognize the ultimate benefit as a substantial one that’s worth working toward. 

Creating Appropriate Systems –  Certain systems, namely those to manage workflow and to formalize and document procedures and processes, should be in place. Transferring responsibility and delegating duties requires effective and well-documented plans and procedures. And, ultimately, if you want your company to pass due diligence with the highest bidder, sell for the best price, and to maintain a successful trajectory, these systems are a big part of the overall process.  

Getting Started

The professionals at Altus Exit Strategies, a wholly owned subsidiary of Albin, Randall & Bennett, are industry leaders here to help your business through the Exit Planning process and other succession planning needs.

Take a moment to examine the areas of your exit plan that need to be addressed using the Altus Exit Strategies Smart Exit Planning: Ready or Not? Assessment

Successful business exits require the involvement of a specialized team of advisors.

As a certified exit planner, I understand the tax benefits and potential tax consequences around timing an exit, and how to pull together the right team, resources, and strategy to increase transferable value and to set you up for a successful exit. Contact me today for more information.



by David Jean, CPA, CCIFP, CExP


David-JeanDavid Jean is the Director of Altus Exit Strategies and a Principal at Albin, Randall & Bennett, where he is also the Succession Planning Services Practice Leader. David works with business owners who want to improve the value of their business before they sell through the Seven-Step Exit Planning Preparation™ process. He has worked with companies from $5 million to $50 million in revenue across a range of industries.


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