The Benefits of an Effective Seller Transition Period

A very important part of selling your business occurs after the business has been sold. The transition period, also known as the handover period, begins when the exiting owner remains with business for a period of time to assist the new owner with taking control of the company. The transition period should be carefully planned and thought through in order to ensure that it is well executed when the time comes. It can make a great deal of sense to begin working on these details early on in the sale process.

There are many benefits to structuring an effective transition period. When done well, it can provide comfort and reassurance to both you and the buyer that the business performance will not fail. Ownership hands suddenly changing can have a negative effect on the performance of a business. The seller's knowledge of the business and expertise can successfully deliver a business through this time. While it may feel a bit strange at first to stay on when someone else is running the company, working with a new owner can be fun and exciting and offer you new challenges. Typically, you will train the new owner as needed; slowly decreasing your involvement while the buyer gradually increases their involvement over time. This process continues until the transition period is complete and the new owner is running the business independently.

The staff can also be reassured by continuing to work with you for a while. When you personally introduce them to the buyer and communicate that you will be remaining on with the business for a certain time, the chances of high employee morale will increase. How an employee feels about their job and working environment has been proven to have a huge impact on productivity. Keeping your employees "in the know" at the time of sale and communicating the changes taking place can pay off for you in the long run. Being there to teach the incoming owner the day-to-day business processes is extremely important, as the transition period is not the time to introduce sweeping changes that may make the current staff nervous. For example, employees expect to continue to be paid accurately and on time with the new ownership. You can assist the new owner with learning how the existing payroll is done and be sure that employees will remain paid and happy.  

When it comes to your customer relationships, you also want a seamless transition to avoid losing any of their business. What if it was possible to guarantee that a large majority of your customers will stay after a new owner is in place? Communication can assist with creating that seamless transition from the viewpoint of your customer. When you make a personal introduction of the new owner to your customers, it can keep the customer satisfied and also motivate them to stick with the business. When the customers see that you are working side by side with the incoming owner, it shows them that the level of customer service will not change, and they can expect it to remain the same going forward.

Finally, staying on can mean that you will be able to share in the company's growth and, as a result, the wealth. If an earnout were a part of your deal, this would be your time to assist with increasing the company's performance. After all, the better the company performs the more money that you can potentially earn. Typically, these earnout payments are over a period of time, meaning that you will be provided with an additional source of income. Because the sale of the company is spread over several years, the amount of taxes that you owe will be spread out as well.

The way in which you will be involved after a sale can vary. The most important factor is making sure that the business continues to run without a significant interruption. With you remaining in the business for a set period of time, you can help to ensure that your legacy will carry on for many future generations to come.

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