You have put your heart and soul into your business, but now it’s time to “pass the baton” onto another person. Maybe it’s time to retire, or maybe you want to do something different. To achieve the best possible result, you must plan your succession. There are a lot of businesses for sale in the marketplace – what is going to make your business standout to a potential buyer.
Most business owners have in mind what they think the business is worth or what sale price they want to achieve. An excellent starting point in succession planning is to determine the current value of the business and what the key value drivers in the business are. The owner then has a clear focus on what needs to be done to increase the value of the business. This is the start of the process of grooming the business for sale, just as homeowners needs to groom their homes for sale to maximize the sale price.
Potential purchasers of the business need to be identified. Is there a family member who wants to take over the business? If so, some difficult questions need to be addressed including:
- Does this person have the necessary skills to run the business?
- How will this person fund the purchase price?
- What impact does this have on other family members?
Business transactions between family members often have additional difficult issues to address due to the family dynamics involved.
Other potential purchasers may include competitors, current management or a sale to a third party. Each group provides their own issues to work through.
Succession planning is a continuing process that will last several years. The business owner needs to commit to the process. The reward comes at the end of the process when you achieve the best possible sale price or transfer to the next generation.
