Who’s your Successor?
If you’ve read the first two blogs you now understand the importance of planning ahead! Owning a business is hard work (we don’t have to tell you that), and whether you are planning to retire or just moving on to another new adventure, you want to make sure the business you worked hard to build is left in good hands.
Which brings us to the next important piece –who will be your successor?
Maybe you plan on transferring your business to a family member, a key employee, or a third party –whatever route you decide, you should start the communication process with your possible successor as soon as possible to make sure everything aligns when it’s time to hand over the keys.
Let’s say you decide to pass your business to someone in your family –are they aware of your succession strategy? Is this part of their plan too? Having a family member take over the business may feel like the most appropriate plan of action if, of course, you feel that member is qualified to do so. Starting the conversation with your children today will help highlight what needs to be done leading up to the transfer.
Or perhaps you’re thinking of selling to one of your key employees. This could be a logical decision for the future of your business, choosing someone who is a huge value to your business and giving them full reign. After all, they are likely one of the key components in the success you’ve experienced to date. If this is the route you’re leaning towards, have you given any thought to how your children will take the news? Avoiding conflict is another good reason to have open communication with your family from the beginning.
One of the issues business owners face with either of these two options is often financing. The important question in both cases is often how confident are you that the new owner will be able to run the business profitably to ensure you are paid? Key employees or family members rarely have the ability to pay you the entire amount on day one. Vendor financing is a typical scenario for these types of succession plans.
The other option is selling your business to a third party, Although finding a buyer for small to medium sized businesses can sometimes be challenging. Also, when selling to a third party, it’s always a good idea to ensure your key employees are onboard with the purchaser, their plans for the future of the business, and the work involved to the complete the sale.
There are many avenues you can take but once again, we stress that planning ahead is key. This information can help you get started, but as always, it’s important to meet with your team of professionals to discuss how each option fits with your goals and circumstance.
Please visit our special resource page to download our free Succession Planning Guide and custom video tips.