Every business is unique, therefore, the transition process will also have its unique transition steps specific to the business’s industry and operations. I highly recommend consulting with your team of advisors, e.g., business broker, CPA, business attorney, industry consultant, etc., to customize your transition plan to your specific situation. However, there are some common steps in every transition process. 

Here are the most common transition steps a typical business will face:

1. Close the Deal: The seller should ensure all legal and financial transactions are documented and shared at the closing table as a record of the sale.  For example:
   • Bring reports of all A/R and A/P belonging to the seller.
   • Bring the status of work in process and agreements on an equitable split.
   • Bring a report of any outstanding liabilities, e.g., gift cards, store credits, or customer deposits.   
      
2. Transfer Information: The seller should write and document the necessary operational information for the buyer and bring it to the closing table as a record of the sale.  For example:
   • Alarm and/or other access codes.
   • Computer passwords for software, social media accounts, etc.
   • Customer list.
   • Supplier/vendor lists.
     
     
3. Dissolve or Update Business Entity: If an asset sale, the seller should plan to dissolve or change the name of the previous business entity.  If a stock sale, the buyer and seller should update the existing entity’s information with the State and the Internal Revenue Service.
   • In an asset sale, the seller will still need to receive A/R, pay bills, and file taxes.  After this is complete, most sellers will want to dissolve their corporate entity.  In some instances, where the seller is only selling a fraction of their business, they will keep their corporate entity.  In rare instances, the seller will file with the State to immediately dissolve their corporate entity, or change its name to eliminate confusion with the buyer's new entity.
   • In a stock sale, it is highly recommended to have a business attorney or the transaction attorney file the appropriate notification of the stock ownership transfer with the State and Internal Revenue Service.   
     
     
4. Notify Stakeholders: Inform all parties who need to be made aware of the sale.  For example:
   • If the seller has any creditors, arrange to pay them off with the proceeds of the sale. 
   • Buyer and seller should jointly inform all suppliers to ensure new credit accounts are established.
   • Buyer and seller may or may not decide to inform customers.  If the seller is the primary contact with key customers, it is often advisable to initiate a mutual introduction after the sale.  If the seller is not the primary contact, it is often advisable to not announce the sale to customers.  
   • Immediately after the closing, the buyer and seller should hold an employee meeting to announce the sale.  The seller should reassure the employees they are in good hands.  The buyer should reassure the employees their jobs are secure and little will change in the coming months.
     
     
5. Cancel or Transfer Permits/Licenses: This is most often handled prior to the sale, but in certain circumstances, ongoing licensing, permits, and registrations cannot be transferred to the buyer until after a sale.
   • In an asset sale, the seller should provide a list of all necessary permits, licenses, and registrations that need to be transferred to a new owner and work with the buyer to transfer them. 
   • For businesses requiring licensing, the buyer and seller will need to work together to ensure a license holder remains in place for continued operation.  If the buyer has the license, great!  If not, sometimes the seller or an existing employee will hold the license for the buyer.  Occasionally, a buyer must hire a license holder to sponsor the business.
   • Post-sale permits and registrations are generally paperwork exercises with State or local entities involving filing a notice of the sale and enduring an inspection.  The seller can help the buyer understand the filing process and communicate inspection expectations to ensure a successful transfer. 
     
     
6. Assess the Marketplace: The buyer will want to establish their business plan for moving forward.  The seller should have a good sense of the present market conditions, industry trends, and economic climate.  Working together to establish the buyer's business plan is always highly recommended.
   
   
7. Assemble the Post-Sale Team: Buyers tend to bring their own set of advisors into a transaction; however, during the transition, they may find some of the seller's advisors may be a better resource for them moving forward.  The seller's CPA, attorney, or business consultant has more knowledge and experience with the specific business; therefore, they may be able to better guide the buyer through the transition and future business operations.
   
   
8. Conduct Review: During the transition phase, the buyer and seller should conduct a thorough review of the business’s fundamental metrics, documents, talent, and reputation.  A "fresh-eyes" look from the buyer may identify some areas of financial and/or operational improvements, which leads to the next step.
   
   
9. Implement Changes Gradually: Buyers should start with minor changes to avoid disrupting the business’s operations or alienating customers.  Most people are naturally resistant to change.  Ensure the benefit of each and every change is clearly communicated to gain the support of employees and customers.  This will help develop trust in the buyer's leadership and decision-making and make future, more dramatic changes, easier for everyone involved.
   
   
10. Boost Morale: The buyer, along with the seller in the early stages, should frequently meet with employees to establish trust and boost morale during the transition period.  Employees like to be noticed and heard.  Give them this opportunity to become champions of the process.
    
    
11. Maintain Records: Again, the buyer and seller should meet early on in the transition process to understand the seller's record-keeping process.  The process should remain intact until the buyer can fully understand the business and implement improvements.
    
    
12. Review Policies: The buyer should examine employee and customer policies as well as other operational procedures to ensure they align with their vision for the business.  Once the transition has been completed, the business is stabilized, and the seller has fully exited the day-to-day operations, integrate policy and procedural changes into the business gradually as stressed in #9 above. 

Again, every business is unique.  You will likely need to customize your transition plan to your specific industry and operations. Always leverage your team of advisors to customize your transition plan to your specific situation to ensure the business's continued success!


To learn more about buying or selling a business, contact Eric J. Gall at [email protected] or 239-738-6227 for a confidential, complimentary discussion.