By Randall J. RichardAs an expert in business succession planning, I have helped many clients navigate the complexities of transferring ownership and management.
Learn from our esteemed panelists as they share their insights to help owners make smarter business decisions
When you’ve devoted the time and resources necessary to sustain and grow a privately-held business, the prospect of developing a practical, profitable exit strategy brings both promise—and challenges. Whether you start your business from the ground-floor or purchased a going concern, the task requires a careful balance between working for the business—and working on it. With so many factors going into a business transition, from identifying & developing the future leadership team to maximizing the value of your business, the task of preparing for transition can seem downright overwhelming. Business succession planning can make the process much smoother. But when you approach it like the opportunity it represents, the effort starts to seem more like an adventure—and less like a chore.
Why More Owners Are Thinking About Transition Now
It’s worthwhile to put the prospect of transition in context. For most business owners, the past couple of years were unlike any that came before, often marked by unexpected business challenges and long hours. Today, more than two years after the pandemic began, the impacts of COVID-19 are still playing out.
If you’re like many of the business-owner clients we work with, the pandemic effects are still affecting your everyday life. But for many business owners, these disruptions led to lots of perspective-shifting introspection. In many cases, that introspection brought forth an increased desire to reallocate time away from work—and toward passion pursuits that had long played second fiddle to the demands of running a business.
While this scenario wasn’t universal, it’s become more and more common—and it’s pushed the idea of business transition to the forefront. In many cases, a comprehensive business succession plan can help. Transition timelines have accelerated. Now, more than ever before, owners are preparing for what could be the largest financial transaction of their lifetime.
But where to begin? Once you’ve done the soul searching necessary to encourage transition sooner than later, there are four key considerations we encourage our clients to make. By addressing each of these four considerations, you will be in the driver’s seat well before signing on the dotted line. Here’s what to keep in mind before you make the leap in your business succession planning:
- Solidifying your personal financial plan
- Assembling your advisory team
- Understanding and maximizing the value of your business
- Objectively viewing your business through the lens of a prospective buyer
Why are these important?
- You’ll negotiate more confidently during business succession planning when you understand how much value you need to extract from your business to realize your personal financial objectives.
- Smart sellers don’t go it alone. For most owners, business transition is a rare event—and the best leaders know their limitations. This is the ideal time to seek complementary input, to leverage professional expertise, and to retain guidance to navigate a complex transaction.
- You want to maximize the value of your business. There are business changes that can be made today to maximize company value in the future, and they may be things you haven’t considered.
- You need to understand your buyer’s perspective. Viewing your business through the lens of a prospective buyer helps you to understand why they’re considering purchasing your business in the first place. This allows you to focus on the areas of your business that are of interest.
Last month we had the opportunity to sit down with four experts to further explore this topic—and to share valuable insights with owners to help them make better business decisions. The Q&A below provides highlights from the panel discussion:
Q: Why is it important to have your personal plan in order before deciding to exit your business?
Q: What are buyers looking for when making an acquisition?
Q: How do I maximize company value at exit?
Q: What is Private Equity, how does it work, and why should I care as a business owner?
Thinking about exiting your business, but unsure where to start? Connect with a Richard Brothers financial professional located in South Portland, ME today to discover how you can secure your future with wise financial moves.
