No matter what size your business is, planning for the succession of the ownership and leadership of your business is the key component to its long-term success.
Your succession planning might consist of one or more of three options:
- Transitioning the ownership to someone in your family or organization
- Selling the business
- Closing the business
Option 1: Leadership Transition
Transitioning your business to someone in your family or organization involves:
- Leadership – Is someone within your organization capable and ready to take over your business? And if so, when?
- Valuation – What is the value of the business, especially when a partial interest is being sold?
- Payments – How will the new leadership pay for your interest?
- Workout – What role will you play in the transition and for how long?
- Tracking and Benchmarks – keeping the transition on task and on time
Option 2: Sale of Business
Selling your business requires three to five years of intensive planning before the property is ready for sale. Some of these issues include:
- Collecting accounts receivables
- Selling excess inventory and equipment
- Evaluating the current prices and terms
- Evaluating building and equipment leases
- Evaluating, training and development of key employees
- Evaluating the pay structure of the key employees
- Evaluating the pay structure of the owner(s)
- Improving the cash flow of the business
Option 3: Close of Business
Many businesses pursue the first two options simultaneously, reserving the option to close the business as a last resort.
It Takes a Team
No one professional has all the skills you will need in the succession process. Here are a few of the members of the team you may need:
- Certified Public Accountant
- Business succession attorney
- Employment law attorney
- Business appraiser
- Real estate appraiser
- Business succession consultant
- Business coach
- Real estate agent