It might seem counterintuitive to think about selling a business while you’re focused on growing it, but that is precisely the time to begin succession planning, says Tony Ferraro, managing director of commercial lending at Bridgewater Bank. Just as the entrepreneurial bank prides itself on helping clients start and grow their businesses, creating a roadmap for the future when the time comes to retire or sell is equally important.

Being unconventional and shifting the paradigm of the traditional banking experience is one of Bridgewater’s core values—that’s why Ferraro is conscientious about asking clients what their long-term plans are. “It’s important to thoroughly understand a client’s goals for their company, and then make sure they have the right tools and a solid plan for getting there,” he says. That means laying out expectations on factors like anticipated value, potential buyers (internal or external), and a projected timeline. “With enough time and a good strategy in place, the owner can work their plan for a very successful outcome.”

Building an exit ramp

An exit plan should be started three to five years ahead of making a transition, Ferraro says, and the first step is to build a team of advisors, such as a CPA, financial advisor, attorney, and trusted banking partner to align the business owner’s expectations with reality.

The second step is to create a detailed succession plan. Whether the goal is to sell the business to a third party, a competitor, or an employee, each scenario presents different issues to carefully consider before a deal is made.

Is the company balance sheet in a strong enough financial position to have debt added to it for a buyout? Selling a business can really shake up your finances, says Ferraro, so a good banking partner “can help you figure out what a buyer might realistically pay for your business and what they might expect from you.”

The sweet smell of success

Valued, trusted employees have the highest success rate in buying a business, especially when they work for a like-minded owner who plans to sell to their employees, Ferraro says. The sticking point, of course, is financing. “These transactions are typically seven to eight figures and require a strong financial backing, whether from the buyer’s personal wealth or financial backers,” he says. “It is something the business owner and employee have to plan for.”

In one succession plan with which Ferraro was involved, key employees bought a company over a 15-year period—a longer than normal time that benefited the sellers and buyers. The plan allowed the sellers to receive payments earlier than they would have and spread the income over 15 years, to help with estate and tax planning. They also stayed engaged in the business and benefited when the valuation for shares increased.

For the buyers, the succession plan gave them an easier path to finance the buy-ins with the bank. They borrowed money for each year’s buy-in at amounts that were more manageable than if they had financed the purchase of the company in one large transaction. It was a win-win.

An ally from beginning to end

For Ferraro and his Bridgewater associates, finding collaborative, innovative solutions is a priority. “We are a well-networked team happy to make referrals to key advisors in addition to helping an owner get their business in position to sell,” he says. “We’re true partners dedicated to our client’s success throughout their entire journey.”