Are you a small-business owner without a succession plan? You’re not alone. According to a 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 don’t think such a plan is 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
A succession plan may not be at the top of your priority list, especially if you’re not approaching retirement. However, a sound, comprehensive succession plan is a critical tool for many business owners. Your succession plan can help you make strategic long-term decisions so you can capture maximum value when it finally is time to exit your business.
Not sure how to begin your succession planning? Below are a few tips to get you started. You’ve worked too hard to build your business to not fully benefit from its value when it comes time to exit. Get started on your planning today.
Identify your objectives.
Any financial plan should start with a list of needs and objectives. Business succession planning is no exception. What are your main goals when you exit your business? How do you want to transition the company to the next owner? Would you like to stay involved or continue to benefit from the company’s growth? Or do you want a clean break?
It’s possible that you don’t yet know the answers to these questions. Your financial professional can work with you to clarify your objectives and priorities. There’s no standard or cookie-cutter strategy that’s right for every business. Yours should be based on your unique needs and goals, so it’s important to think about your priorities.
Get a professional valuation of your business.
Business owners often have inaccurate estimates about the value of their business. They’re so involved in the day-to-day operations that they don’t clearly see areas for improvement. Or they may overestimate the market for their business.
A business valuation professional can offer an objective, unbiased estimate of the potential sale price of your business. Even if you’re not close to selling, this estimate can be a helpful tool. The valuation may identify areas that need attention or possible opportunities you haven’t leveraged. You can use that information to strengthen your business so you can get full value when it’s time to sell.
Many business owners believe they shouldn’t start planning for succession until they’re ready to retire. The truth is that’s probably too late. It’s never too early to think about succession. Business sales can often take months or even years to complete. 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.
There’s also the risk 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 planning? Let’s talk about it. Contact us today at First Fidelity Group. We can help you analyze your needs and implement a strategy. Let’s connect soon and start the conversation.
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17599 - 2018/4/19
First Fidelity Group
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