Transition plans preserve wealth, jobs and community impact. Learn how to build one for your business.

Sponsored by JPMorganChase

Planning for your small business future

If you’re in the beginning stages of launching your small business or a just few years into ownership, you might not be thinking about exit plans. Preparing for an ownership transition, however, is a critical part of every entrepreneur’s journey. 

Not only is a transition plan important for your financial future, a successful transition plan also keeps businesses in communities, preserves jobs, diversifies ownership and creates wealth-building opportunities for current and new owners. 

Why transition plans are important

A transition could happen sooner than you think. Seventy-five percent of owners said they’d like to exit their business within the next decade, and 51% of owners are projected to retire during that period. A deeper look at the survey, however, shows a more concerning issue — about 58% of owners had no formal transition plan. 

A lack of transition planning can not only have a negative effect on your own finances, but the community as well. 

Options for transition

Understanding the options available in any ownership transition is essential to creating the right plan. Smart succession options can include intergenerational transfers, which means passing on a business to heirs; mergers and acquisitions with another firm or entrepreneur; or an employee ownership transition model.

While many small business owners might dream of leaving their companies to their children or other family members, only 30% of family businesses survive the transition from first-to-second generation ownership. This is why it’s important to consider all options – maybe selling to a private equity company or a competitor could make the most sense for your situation. If you consider selling to employees, you can establish a legacy while realizing the value of the business, which improves firm outcomes and creates shared ownership and wealth-building opportunities for employees. The Employee Stock Ownership Plan is a popular model for this type of transition.

Find support for your transition

No matter the timing of your exit plan, your financial institution can provide access to strategic advisors, financing and connections to buyers and sellers at every stage of your journey. 

The below checklist can help business owners identify their long-term goals and guide them through the decisions involved in any owner transition process. 

• Understand options: Assessing ownership transition options – including intergenerational transfers, mergers and acquisitions and employee transactions – is the first step in creating the best plan to meet the owner’s goals and result in a sustainable new organization of the business.
• Anticipate change: Ownership transitions can have a significant impact on a business owner’s personal balance sheet, family and financial health. Having clear goals for what a successful business succession looks like—and what life looks after an ownership transition, including near- and short-term expenses—is essential.
• Select advisors carefully: Assembling a team of trusted advisors can make the process more effective and ensure all parties are aligned and focused on long-term success. Advisors can include accountants, business brokers, mergers and acquisition advisors, valuation experts, attorneys and bankers.

The bottom line

Planning for an ownership transition should be a standard part of every owner’s business plan, no matter the stage of your entrepreneurship journey. As you continue to grow and scale your business, it’s important to understand the options available for the future success of your business. 

For more small business financial health tips, visit chase.com/succession

For informational/educational purposes only: Views and strategies described on this article or provided via links may not be appropriate for everyone and are not intended as specific advice/recommendation for any business. Information has been obtained from sources believed to be reliable, but JPMorgan Chase & Co. or its affiliates and/or subsidiaries do not warrant its completeness or accuracy. The material is not intended to provide legal, tax, or financial advice or to indicate the availability or suitability of any JPMorgan Chase Bank, N.A. product or service. You should carefully consider your needs and objectives before making any decisions and consult the appropriate professional(s). Outlooks and past performance are not guarantees of future results. JPMorgan Chase & Co. and its affiliates are not responsible for, and do not provide or endorse third party products, services, or other content.

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