Do you lack a succession plan for your small business? Don’t worry. You have company. A small-business survey from Nationwide found that 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
If you’re not nearing retirement, a succession plan may not seem like an urgent priority. However, a sound succession plan can be an important tool for any business owner, no matter your age. 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. It can also protect your business and your family in the event of an emergency.
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.
List your goals.
Financial planning should always start with your unique goals, and business succession planning is no exception. Think about what you want to happen when you leave 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?
You may not know the answers to all these questions. That’s OK. Just thinking about them and starting the conversation can help you determine what’s right for you. Your financial professional can also work with you to clarify your objectives and priorities. There’s no standard or 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 to offer an objective valuation of your business.
You probably have an idea of what your business is worth. However, your valuation may not be objective. You’re heavily involved in the day-to-day operations of the company, so it may be difficult for you to view the business as an outsider would.
Consider hiring a business valuation professional to analyze your company. They can offer an objective estimate of your business’s value based on the current market and your company’s strengths. They can also identify areas 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.
Start as soon as you can.
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 Thomas Financial. We can help you analyze your needs and implement a strategy. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
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