HCJ Partner Paul Osborn on Avoiding Exit Planning Mistakes

Osborn is a certified public accountant and a certified valuation analyst. (Steve Lewis)

What are the biggest mistakes Arkansas business owners make when planning their exit?

Waiting too long to start a succession plan. Successful exits are a result of developing future leaders in the company, identifying potential buyers, knowing your company’s numbers and market, and cleaning up your financial records.

How early should a business start thinking about succession planning, and what should the first steps be?

Succession planning should start two to five years before an exit. The first step is to identify what a successful transition looks like to you. Does it mean a family member taking over the company and you then work part time? Does it mean a sale to a competitor? What is the most important result you want to achieve in an exit? Start making yourself replaceable so you can show a buyer that the company will continue to run without you.

What trends are you seeing in family business transitions versus outside sales?

Fewer businesses today are handed down to the next generation, and more are sold to outside parties. Selling to an outside party is usually more time-consuming because the buyer will not have the same familiarity with the business and its customers that a family member would have.

What should a business owner who is thinking of selling in the next two to five years be doing right now?

Evaluate your pool of potential buyers. Plan for what life after the sale looks like for you. Have a strong understanding of the company’s financial statements, operate as efficiently as possible, and remove discretionary or personal expenses from the company. Consider having a financial statement review or audit performed by a CPA firm, as this will give a buyer comfort that the financials are accurate. Obtain a business valuation to help you set expectations and identify areas that can be improved to increase value.

What is HCJ doing to attract and retain professionals in a tight labor market?

HCJ offers an environment of excellence. The people at HCJ represent the best of our profession, and this culture attracts others who strive for excellence and growth.

What tax changes or regulatory shifts should businesses be preparing for in 2025 and 2026?

The Tax Cuts & Jobs Act will expire at the end of 2025 if not renewed. Businesses should monitor legislation related to bonus depreciation and the 20% qualified business income deduction.