According to a recent small-business survey from Nationwide, half of respondents said they don’t have a succession plan. Among those without a plan, 47 percent said they didn’t think such a plan was necessary. An additional 22 percent said they didn’t have time or know how to proceed, while 11 percent said they didn’t have time.1
Are you one of the many business owners lacking a succession plan? It may not seem like an important priority right now, but a succession plan can be an important tool to maximize your company’s value and protect your business and family from risk.
Not sure what a succession plan looks like? Or how to start the process? Below are a few steps to help you begin. You may want to consult with a financial professional to help you implement a strategy that’s aligned with your specific needs and goals.
List your goals.
Any financial plan should be driven by your unique goals and objectives, and succession planning is no exception. After all, you have to know where you want to end up before you can implement a plan. Ask yourself some questions about your future. How do you want to exit your company? What would ideally happen to the business after you retire? Would you like to stay involved or continue to benefit from the company’s growth? Or do you want a clean break?
If you don’t know the answers to these questions right now, that’s OK. By asking yourself these questions, you can start the process of thinking about your future and developing your goals. Your financial professional can also work with you to clarify your objectives and priorities. There’s no standard, cookie-cutter strategy that’s right for every business. Your business succession plan should be based on your specific needs and goals.
Get a professional valuation of your business.
You may have your own estimate of how much your business is worth. However, many business owners are biased by their own involvement in the company. Your estimate may not be the same as a potential buyer’s. You may not see things that an outsider would notice, or you may not have a clear understanding of the market.
A business valuation professional can analyze your company and offer an objective estimate of its value. They can also identify areas of strength and opportunities for improvement, which you can use to develop your strategy going forward. With a valuation in hand, you can take action to improve your company and boost its value before you exit.
Don’t wait to get started.
Think you’re too young to worry about business succession? Think again. The truth is it’s never too early to think about succession. It can take years to find the right buyer and close the transaction. You may need to forge strong alliances with a competitor, vendor or customer to facilitate a sale. You might need to groom an internal successor and help him or her coordinate financing for the purchase.
It’s also possible that you won’t get to choose the timing of your exit. You could suffer an illness, injury or even unexpected death. Your business plan, especially if backed up by a strong buy-sell agreement, can help facilitate the continuation of your business in your absence. If you don’t have a plan, your family and employees could be exposed to risk.
Ready to develop your business succession plan? Let’s talk about it. Contact us today at Jim Lee Financial. We can help you analyze your needs and implement a strategy. Let’s connect soon and start the conversation.
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