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By Rob Daly and Brian Ross

Business owners often think of transition readiness as retirement readiness, but these terms are not synonymous; 40 percent of business transitions are involuntary and forced long before retirement.

Transitioning a privately owned business is inevitable, and owners should be transition-ready regardless of the time on their retirement clocks. Positioning a business to project sustained and improved future performance, with minimum risk, keeps most transition options on the table and dramatically improves the outcome for both the owners and stakeholders beyond the company.

So how does a private business owner successfully prepare the business for transition?

Owners should focus on building shareholder value from day one because a broad range of stakeholders are well served when shareholder value is at the core. Take the time to understand what comprises value and develop the capability to pull the levers that drive it.

Over the life of the business, owners should regularly assess the intrinsic value of the business, and adjust the company’s strategy to continually improve it. Structure buy/sell agreements to protect the company’s value and mitigate its risk, and refresh the company’s strategy in alignment with the evolving business dynamics and value of the business.

Owners should gather a management team with the capacity to change and innovate over time; hiring should not be limited to skill sets that are appropriate for the moment. Team members should be given room to grow, and compensated according to their value. A talented team is likely to provide options for succession, even if there is a family heir apparent. Owners should elevate the human resources and marketing functions to a management-team level capable of attracting and retaining talent as well as converting market opportunities into growth.

Owners need to develop a written annual strategic plan, not simply a revised budget from the prior year, and stress test it against the real strengths, weaknesses, opportunities and threats of the business. A multiyear plan should identify the financial implications and resource requirements associated with the strategy over time. Owners should maintain strong relationships with their banks and additional sources of funding to ensure ongoing access to capital.

A board should hold management accountable for operating true to its plan and consistently with its strategy. Owners can build trust with the board by working with transparency and honesty. Trust and transparency will strengthen management as well as family dynamics.

Technology disruption will find a company regardless of its size or industry — and owners should prepare for it. They can start with a digital strategy focused on the customer experience. Owners shouldn’t be afraid to become early adopters of new technologies. Forward-looking owners should develop some level of research and development capability, even if it is only in a defensive capacity.

When it comes time to develop a transition plan to execute against, you and your advisory team should find that your desired options are viable and the hoped-for outcomes of transition are within reach.

Rob Daly and Brian Ross are both senior advisors for the Center for Business Transition at RSM US LLP. Reach Rob at 513-354-3500 or rob.daly@rsmus.com, and Brian at 513-354 3523 or brian.ross@rsmus.com.