Don't Get Trapped By Failing To Plan!
by Dave Driscoll
Business owners, I know you have worked extremely hard to build your businesses. Your singular focus means you know your business inside and out and have been responsible for the decisions and commitment that have built the company into what it has become.
The approaching new year reminds us all that the time has come, however, for you to not only work in your business but work on it as well! What does that mean? You need to prepare to transition your business to a family member, key employee or third-party buyer – and you need to do this while continuing to manage daily operations to maintain and grow the business.
Where do you begin? What is the most effective and profitable way to tackle this very important planning? Where will you find the time on top of your daily responsibilities? Where can you find all the resources needed with the knowledge and experience to walk you through this process, the single most critical financial event of your career?
Consider the following facts:
• A majority of closely held and family businesses will change hands within the next five years.
• Half of the 9.5 million owners of established businesses are reaching the age of 50 – the typical age at which owners begin to think about their transition.
• 75% of the typical business owner’s net worth is tied up in his/her company; this is the main resource for funding retirement.
• Many of the owners of these businesses have not yet begun the necessary steps to prepare for a successful, profitable transition of ownership. In fact, only 22% of those owners have reported doing any succession planning.
Why do you need a succession plan?
1. To minimize taxes.
2. To decrease the risk of not meeting your personal goals.
3. To reduce the chance of losing options.
4. To avoid losing control of the outcome.
5. To protect against the lower value if you die or become disabled without a succession plan.
6. To eliminate corporate hygiene issues that are decreasing company profitability.
With so much at risk, do you really want to try to manage this process alone – or, worse yet, leave the outcome up to chance?
Proper knowledge and preparation can mean hundreds of thousands or even millions of dollars to you when you eventually leave your business. Planning and thoroughly preparing for your succession years before your desired transition will help you avoid the all-too-common fate of many owners who failed to plan and were disappointed and stuck settling for what little (if any) return they could get. Don’t set yourself up to be trapped in your business with too few options to enjoy what you and your family should have earned.
To “own your succession,” you need to take the proactive step to begin the process at least three to five years before your target departure date. Take the time to investigate the resources available to help you clearly define and realize your objectives. You need to select a business broker/adviser to help manage the complexities of this process and coordinate all your professional advisers necessary to attain your objectives. This is a long-term project, not just a transaction, so your adviser must have the business experience necessary to be the “quarterback” of the team focused on you and your goals!
Dave Driscoll is president of Metro Business Advisors, a mergers and acquisitions business broker, business valuation, and exit/succession planning firm helping owners of companies with revenue up to $20 million sell their most valuable asset. Reach Dave at DDriscoll@MetroBusinessAdvisors.com or 314-303-5600. For more information, visit www.MetroBusinessAdvisors.com.
Submitted 10 years 25 days ago