If you are a business owner you have spent years accumulating knowledge about your market and how to tailor your business model to that ever changing demand. It is certainly a consuming feat.
For years, as a small business owner, I am sure your goal was maintaining positive cash flow and a stable balance sheet. Retirement probably seems like a distant speck on the horizon, maybe it hasn’t even been considered. However, establishing a sound business succession plan is beneficial for most business owners and can be absolutely necessary for some. Is it for you? When will it be time to sell?
We’ve all heard timing is everything, but often we become victims of time. In fact, I would imagine one of the hardest aspects of owning a business is determining when the time is right…to get out. Kin to selling any asset you are always better off selling at a high point of demand.
Have a game plan in place so you aren’t forced to execute a fire sale because you neglected to have a sound succession plan in place.
Here are some simple tips from a Madison area attorney on Business Succession Planning:
- Start Early – This allows you time to train successors and evaluate them, there is always the possibility things don’t work out as planned. The goal in starting early is to obtain a gradual transition without notice.
- Define goals and objectives – This includes all goals including retirement and financial planning. Goals for family and beneficiaries should be taken into consideration as well as other interested parties such as co-owners and key employees.
- Get input from outside advisors – By gathering input from outside advisors one gains objectivity, experience, and expertise including but not limited to legal, taxation, valuation and financial planning.
- Identify desired successors – Whether it is a family member, key employee(s), or an investor group; identify the individual(s) who will be most likely to succeed. Unless you are one of the few that will have the luxury of a cash buyout, it is important that your business continues to succeed after you relinquish management and ownership of the business.
One other thing I would like to make note of; I recently attended a seminar hosted by the Madison Estate Council and the speaker that evening touched on an all too often overlooked aspect of Succession Planning when it comes in the form of Family Business; and that is the emotional aspect of the transfer.
The speaker, Shipra Seefeldt, the owner of Strategic Solutions Consulting; stressed conflicting values – “…values of the family are often in conflict with values of the business. It is always important to consider the emotional transfers of wealth as well as the physical transfers of wealth.”
Family businesses add an additional challenge to the succession plan and as a business owner in the Dane County area, you have some excellent resources at your fingertips to build your multidisciplinary team including;
- Financial Planners,
- Family Business Consultants, etc.
Tapping into some of these resources will help you tremendously during the development stage of your business succession plan.
Let us know if we can help guide you through the process.