What Triggers Succession Planning?
Anyone who owns a business arrives at a point, sooner or later, when it is time to plan on how to move out of the business and into retirement.
All business owners should map out a plan of what would happen if there needed to be a sudden change in control of the business. Retirement is not the only scenario to be considered.
Take your time and practice "outside the box" thinking when you are considering leaving your business. Choose an option that will be of the most benefit to both your business and you. Happily, if you get started early with your planning for your future, you will have a better future. If you put a good succession plan into place, you will give yourself an edge over other businesses that are too busy struggling with daily demands to be able to take care of this detail. Therefore, we should examine the options in great detail.
Trade Sale
The owners of many businesses only have the option of selling. Even businesses that are family owned and operated may find this option appealing.
Today, fewer and fewer businesses are passed on within a family, regardless of the fact that the Australian Business Banking Board says that sixty percent of family-owned businesses will be changing hands within a few years. Because there are many, many businesses in competition today, having a good succession plan in advance of selling the business can actually be a good selling point. When you plan ahead well before the sale of your business, you can take all the necessary steps to make the greatest profit.
The Succession of Family
If you already have family members who are working happily in your business and want to continue with the business, then business succession is a good option for you, your relatives and your business. Weigh your desire to maintain a family business, and if it would be better for the business to let it go, do so. What would you think if a member of your family took up the reins and destroyed your business? Often parents are surprised to find that their offspring are not interested in the business; even though, the parents had planned to pass it on to them. It is never wise to have someone take up your business due to obligation rather than desire.
If you decide that the best course for your business is family succession, you should think of ways to divide the business between offspring who may be involved in the business - or not. When thinking of dividing the business amongst siblings, it is important to value the business in an accurate manner.
Work with a Partner
If you are overjoyed at leaving the business world (as opposed to anxious) you might think about taking on a partner and letting him or her take care of the day-to-day operations of your business. Being a silent partner will still allow you all the benefits of business ownership but you are not as involved in its daily operations.
Reduce the size of your operations.
A lot of business owners think that handing the control of the business over to someone else or selling the business will be overwhelming. This is especially true if the owner has invested a lot of time, energy and effort in building and improving the business. Those business owners considering retirement are especially vulnerable to this. If the owner has no interest to move on to, s/he may feel an emptiness at retiring. Alternately, existing family members or partners could be passively involved, yet keep the business running. This might be in the role of adviser as a member of the board or in a part-time capacity as an employee.
Close the Doors
There are times when it is better just to close the business. However, it isn't necessary for you to lose money. When you close a business, you also need to sell all merchandise, machinery, equipment and/or vehicles. Very small businesses in which the business doesn't make a lot of profit or the owner is very closely entrenched can benefit from this option. In smaller businesses, the success of the business is often quite reliant upon the owner. If your successor is not familiar with and a part of the day to day workings of your business, it may be difficult for him or her to maintain the good customer relations you have built up. In this instance, you might be better off dropping the business.
Bring on a manager.
If you don't want to do a lot of hard work, yet you do want to maintain control, you could think about appointing a good manager. Hiring a manager can reduce long hours and lighten your load if you hire a manager who is a good fit with your business. The qualities of a good manager are: trustworthiness, good communication skills, excellent knowledge, skills and abilities. Also, plan on what should happen if you become ill or pass away.
Here are some questions you should think about before selling your business:
- Have all of the options been thoroughly examined?
- Are you aware of the value of your business?
- Is the market ready for this?
- Would selling be the best financial option for me?
- Is it possible for my business to continue to be a success when I am gone?
( 1 Vote )