75% of business owners do NOT have a Succession or Exit Plan!

I was recently invited to a seminar presented by a national accounting firm titled Succession by Design. Owners of companies were in attendance with their successors/ family members. As we introduced ourselves, it was interesting as the veteran owners were very confident in their future plans and goals while the younger family members were not as confident. You could tell that future uncertainties were weighing on them and their goals were slightly different than their fathers who believed that the family business continuance was the best option. Introducing myself to the group I explained that I work with business owners to plan for the future, but I was probably best known for selling companies and would try to provide another experienced voice. The seminar was informative and called for the Owners to focus on the Value Triangle which emphasizes four areas: Financial, Growth, Execution and Leadership. The development and growth of these business engines in balance leads to greater enterprise value and options for succession. Building a healthy sustainable business is the primary goal. With a solid, profitable business your options are always greater.

Planning is the key to successfully transferring the business to a successor or selling to a new owner. It was encouraging to see business owners planning for the future. Planning always lowers risk and provides a more informed road to success. For the owners, a succession transfer seemed like the best and easiest option. They would be able to control the company for as long as they want and spend time away while they have someone they could trust overseeing the business. This is where the next generation must be confident in their future responsibilities and communicate clearly to ensure they are on board with dad’s plan. You can never eliminate risk entirely as unusual events happen in the future which are sometimes unpredictable. We all know of at least one story of “the kid” messing up daddy’s longtime successful business or the new owner who wants to change things and ends up putting a once successful company into a downward spiral.

I talk to European business brokers and ironically a phenomenon which occurred in this country years ago is also happening there. Many of the next generation do NOT want to be involved with the family business in the future. They want to embark on their own career path. So, if you do have someone to pass the business along to, then I suggest you work on a plan sooner rather than later and become part of the 25% group.

If you do not have a successor then I recommend you start planning on your exit plan which most likely will be a Sale of your company in the future.

PUBLISHED IN THE SOUTHCOAST BUSINESS BULLETIN – FEBRUARY 2014