Are you a small-business owner? Do you lack a succession plan? You’re not alone. 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
A succession plan may not seem like an urgent priority right now, especially if you have a long time until retirement. However, a sound succession plan can be an important tool, even if you don’t intend to leave your business for years. Your succession plan can help you maximize your company’s value and protect your business and family from risk.
Not sure how to start the planning process? Below are a few questions to ask yourself to help you get started. You may want to consult with a financial professional to help you implement a strategy that’s aligned with your specific needs and goals.
What are your goals?
Any financial plan should be driven by your objectives. After all, you have to know where you want to end up before you can implement a plan. Business succession planning is no exception. 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?
It’s OK if you don’t know the answers to these questions. What’s most important is that you consider these questions and others, and then start to think about possible outcomes. 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.
What’s the value of your business?
If you’re like many business owners, you have an idea of how much your business is worth. As the owner of the business, however, you may be so involved in the day-to-day operations that your estimate isn’t objective. 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.
How soon can you start?
You may think you don’t need to worry about succession planning until you’re ready to retire. 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 Grand Canyon Planning Associates. We can help you analyze your needs and implement a strategy. Let’s connect soon and start the conversation.