There are always reasons why business owners don’t do planning…the list is long. But in the end, every business owner knows that they should do planning in their business. While “strategic planning” tops the list for most business leaders, the one that needs to have equal weight and attention is the Succession Plan for the business. Here’s why…
A recent study by Wilmington Trust, “The Power of Planning…Why Business Owners Need Viable Transition plans, and practical strategies for putting them in place,” gave some very interesting statistics and recommendations for why this is so critical to every business. The 27 page report shared both some statistics and some recommendations I thought were helpful. Allow me to share a few of these with you to get you thinking about your own Succession Planning.
Most business owners aren’t ready for a transition of their business
An amazing 58% of business owners have not created a succession plan. A surprising 47% of business owners over the age of 65 do not have a specific succession/transition plan in place. While 78% of the business owners surveyed who don’t have a plan said it’s because they enjoy running their business.
The top 5 “transition goals” owners have, in order of priority, are…
- Ensure company remains viable in the long-run
- Take care of employees
- Ensure customers are taken care of
- Financial security for self and family
- Ensure company retains values
It takes a Team of Advisors
Most business owners agree it takes a TEAM of advisors to help them through the transition and succession process. When it comes to a team, the top 4 advisors they want to have in their corner are…
- TAX EXPERT – 84% of business owners agree
- LAWYER – 83% of business owners agree
- ACCOUNTANT – 83% of business owners agree
- LEGAL TRUST EXPERT – 65% of business owners agree security
What is the Value of your company?
When it comes to the value of their company, it appears there are some strong “gut feels” for the value but that they could all use some input from their team of advisors. Only 2% have no value as to their company’s value, whereas 30% have a general sense, and 67% have a very good feel. However, 67% said they would be either interested or very interested in talking to someone about their company valuation…while only 12% said they had no interest in talking to anyone about valuation.
They also offered some specific steps to take when it comes to transition planning. While I agree with most of these, there are a few others, from a lawyer’s perspective, that should probably be included as well to ensure a smooth transition. The steps they suggested you take include…
- Review your current plans
- Build your team
- Determine and document your goals
- Assess your transition and succession options
- Consider your available business transition tools
- Implement your plan
Options for transitioning your business
Finally, they also explored the various options business owners have for transitioning their business to someone else. These include…
- Keep the business in the family
- Sell to other owners
- Sell to management
- Sell to employees
- Sell to a third party
- Liquidation
- Recapitalize business/cash distribution
I felt the study was very insightful and covered a number of areas that are interesting for a business owner to assess about their own current condition. As with any transition or succession plan, there is no “one size fits all” to what to do. It is as individual as your business. And while there are certainly some specific steps every owner needs to go through, the way they are handle, their importance, the desired result, and the overall process are incredibly individualized.
What to do NOW…
The best advice is to get a team together that understands your needs and can work together to help you get to the right result. I can’t emphasize this point enough…the need for the team to work together. Where I have seen the greatest success, most rewards, and smoothest transition of one business owner to another is when the team is working in complete harmony. Everyone knows their role and what they are going to contribute to the overall objective. When they work together, this is the lowest stress and best result for the person leaving the business.
If you ever have any questions about this or any other aspect of your business, just ask and we’ll be happy to answer them. Or if you want to understand succession planning in more detail and how you could start planning for a successful move, I’d be happy to meet with you (complimentary of course) to discuss it further for your own particular situation. And if you found this helpful and are thinking of someone you know who could benefit from this post, please help them out as well and share this with them.
