Turnover of business ownership: Part 1

Employee turnover has come to be a natural part of the workplace; most companies deal with employee mobility every day. But there is another type of turnover in the workplace that gets less attention, but can be more threatening to the success of the business: owner turnover. 

When you think of mergers, acquisitions, takeovers and buy-outs, you might have visions of impressive board rooms on Wall Street, filled with characters plotting how to dismantle an aging corporation and throw out its management team. Hollywood, and less than 1 percent of all merger and acquisition activity, actually fits that stereotype.  The remaining 99 percent of the business world, including business owners and entrepreneurs in western Colorado, take a more low key approach to changes in ownership of a company.

However, do not let the silence or seeming invisibility of the processes here in western Colorado fool you. There is a significant amount of discussion every day about how an existing business can acquire a competitor or a complementary business; likewise there is rarely a day that goes by that several individuals do not wrestle with how they can liquidate their interests in a business without destroying what they built.

The turnover of the owner(s) of a business can be a great solution for the owners and may actually solve some of the biggest problems that a business may face. In the parlance of the day, that area of business focus is typically called “succession planning” and there are myriad professionals who provide products and/or services to those concerned about such things. 

Bankers, accountants, financial planners, insurance sales people, attorneys and management consultants spend a great deal of time working with individuals on how to handle their retirement or estate plans. When the individual’s assets include ownership of a business, that planning must include an exit strategy for the owners. Business owners who are contemplating a change will do well to make certain that the business they leave behind is as large a part of the exit strategy as is the personal interests of the exiting owner. In part two, we will discuss exit strategies available to business owners to accomplish this.

Garrett Forsgren is a local attorney who provides free estate planning presentations. His office can be reached at 970-245-8021 or .(JavaScript must be enabled to view this email address). Steve Wright is an attorney in Idaho Springs, Idaho.


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