Daniel D. Meiklejohn
JD, CPA, CFP®, CExPTM
Managing Director

A business owner may view their ultimate transition out of the company as an isolated event, and this approach is oftentimes what can lead to undesirable transition results. Business owner transition planning should provide a coordinated, structured process before, during, and after various changes that an owner may experience that could indirectly or directly impact an owner, an owner’s family, and the company. It involves the efforts and coordination of several professional advisors. Still, it should be led by an advisor who is able to view and coordinate all planning for an owner and the company through the “transition lens.” One key component of the planning process that is oftentimes disregarded is identifying and incorporating an owner’s “values-based” goals.

Values-Based Goals

Attaining the after-tax sale proceeds that provide the desired financial security for an owner is certainly mandatory for an owner to be satisfied with the outcome of a transition; provided, however, there are other important, less concrete, non-monetary objectives that ought to be at the forefront of an owner’s mind. These other objectives are often referred to as an owner’s “values-based” goals. These goals play a pivotal role in the decision criteria to achieve the ideal transition. A transition without the personal satisfaction and fulfillment of attaining certain values-based goals may leave an owner with feelings of regret, emptiness, or frustration. It is common for an owner to come to the realization soon after a completed transition that certain values-based goals should have been more of a focal point throughout the planning process. This realization commonly results from an insufficient period allowed for effective planning. Timely transition planning helps minimize the chances an owner is remorseful due to the unexpected impact a transition may have had on the company’s employees, the local community, the owner’s family, the owner’s mindset, the company’s culture, and the owner’s personal legacy.

An owner’s advisor team should be diligent to inquire about and suggest potential “values-based” goals. Once discussed, identified, and prioritized, these goals may end up guiding and playing a prominent role in an owner’s choice of a particular transition strategy and overall plan, so long as the desired financial security is able to still be attained. Indeed, an owner may select a buyer or successor who may be offering a lower purchase price but presents a stronger opportunity to preserve and protect the positive impact the owner had always hoped his or her “transition” from the company would have on the company’s employees, the local community, the owner’s family, the owner’s mindset, the culture of the company, and the owner’s personal legacy.

Goal Selection

Identifying values-based goals is frequently based on an owner’s sentiment, attitude, or feelings. These goals should be concrete, actionable, and achievable. Listed below are values-based goals that warrant thoughtful consideration by an owner when planning for a transition.

• The sale proceeds are in the owner’s pocket when control is relinquished.
• The enjoyment of a smoother, faster transition process for the company.
• The shift of an owner’s mindset before, during, and after a transition.
• The avoidance of future litigation for the company and the owner.
• The minimization of resulting tax obligations.
• The ability to take the company to the next level.
• The resulting impact on key employees and overall company culture.
• The ability to leave the local community in a better position.
• The ability to maintain and strengthen family harmony.
• The affirmation of an owner’s personal legacy.
• The ability to maintain and increase lifestyle in retirement.
• The identification and enjoyment of post-transition personal interests.
• The avoidance of unpleasant surprises and unintended consequences.

An owner should carefully consider, prioritize, and commit to selected goals. These goals reflect an owner’s personal values. To uncover and set these values-based goals, an owner should ask the following questions:

• What is my vision for my company without me?
• What is my vision for me without my company?
• Is the values-based goal important to either vision?
• What are the consequences to others of transferring my ownership in the company as I currently intend?

Goal Conflict

Sometimes, values-based goals may conflict with one another. When these goals collide, planning can come to a halt. An owner should prioritize conflicting goals and make any necessary modifications to alleviate the conflict and provide further integration of goals where possible. Conflicting goals should be assessed and analyzed from the following three perspectives.

• Risk: Will a particular goal choice increase or decrease risk to an owner’s financial security goals and to the company?
• Control: Will a particular goal choice affect an owner’s ability to continue to control the company and his or her own future?
• Value: Will a particular goal choice reduce an owner’s ability to achieve his or her other values-based goal(s)?

Big Picture

Roman philosopher Seneca once wrote, “You must know for which harbor you are headed if you are to catch the right wind to get you there.” Owners should take the challenge to articulate their own “big picture” and which “harbor” they are heading towards. If an owner has not made a sufficient commitment to proactive transition planning, that owner may face significant uncertainty on how a transition may turn out. Business owner transition planning should be a long-term, comprehensive engagement for an owner that strives to align, integrate, and structure the important values-based goals of an owner’s ultimate transition out of a company. The planning process should be owner-centric and focused on increasing the probability that an owner can navigate towards the ultimate transition of the company when the owner wants, to whom the owner wants, and for the value the owner wants. The earlier an owner starts engaging in discussion, establishes the right advisor team, and commits to making proactive transition planning a top priority (even if the exact ultimate transition route is then unknown), the more time and options an owner has to identify and bring his or her established goals into harmony, avoid unnecessary obstacles, address and minimize vulnerabilities and risk, maintain control until attainment of financial security, increase transferable value of the company, and at the end of the day be shown “more than” the money!

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