Selling A Business
Passing the Torch: Successful Business Succession Planning
Like all entrepreneurs, there will come a time in life when you feel the need to exit your business. Whether you’re retiring, burnt out, or have received an offer you can’t refuse, having a succession plan will ensure a successful passing of the torch to a new owner. If you don’t already have a plan in place, get started today by considering these must-ask business succession planning questions.
Must-Ask Questions When Business Succession Planning
When it comes to business succession planning, there’s no one-plan-fits-all strategy. Ask these questions to prepare a plan that’s right for you!
What Has To Be Done in Order for Me To Exit the Business?
First and foremost, your business must be able to operate without your presence. For a successful succession to occur, the next level of management must be assessed, operations must be fine-tuned, and your strategy must be defined.
Who Will My Business Successor Be?
Next, consider who your successor will be. The five most common parties strategies are:
- Selling to an employee
- Selling to third party
- Selling your shares to a partner
- Selling your shares back to the company (only applicable if there are multiple owners)
- Passing ownership on to a family member
While there are pros and cons to each of these succession plans, consider which method will be most beneficial for you, your family, your employees, and your successor.
What Is My Business Worth?
Understanding the value of your business and its growth potential is one of the most critical steps in the planning process. UUnfortunately, most business owners are unable to look at their businesses objectively– and understandably so. The value can seem exponential when you’ve spent years building a business.
To determine true market value, hiring a third party to perform a business valuation is best. With a professional’s business valuation, you can rightfully defend your asking price to a successor.
How Will I Transfer Ownership of My Business?
Consider what the transfer of ownership will look like after the sale of your business. Many business owners commit to staying on the payroll for a set period to ensure business operations are smoothly transitioned to their successor. When planning your succession, determine how long you’re willing to continue working and develop a strategy to transfer responsibilities to the new owner.
What Will My Life Look Like Post-Sale?
Another important step in the business succession planning process is considering what you want to do after the sale of the business. Consider how you’ll fill your time and what financial resources you will need to support your new lifestyle.
Business succession planning requires careful consideration and preparation. Ensure a smooth transition and equitable deal by working with a professional business broker to develop a customized plan. To get started, contact Sunbelt Business Brokers near you to set up a confidential consultation.