Succession Planning – Where do you fit in?
For the majority of small business owners in Canada, the process of selling your business is a unique experience. Most owners have poured a lifetime of work into building a successful company, giving little time or thought to the development of a succession plan.
In a 2011 TD Waterhouse Business Succession survey, over 75% of Canadian small-to-medium sized business owners surveyed said that they did not have a succession plan in place. Additionally, more than 40% of business owners recently surveyed by the Canadian Federation of Independent Business plan to leave their businesses in the next five years, and more than 70% within the next 10 years.
With the majority of baby boomers moving into their early retirement years, more and more business owners are faced with the reality of developing a succession plan. Succession planning is all about having a clearly defined exit strategy. Regardless of the time frame for the sale of your business, there are a number of important steps you can take to ensure that when the time comes it is a seamless process.
Get started early
The earlier you start preparing your succession plan the better. Typically, starting your succession planning two to five years before you plan to exit your business allows the required amount of time to prepare everything for the easiest transition. Addressing this early allows you to maximize the value of the business, which in turn increases the price you command from potential buyers. Having a clear succession plan also allows you to fully explore your transition options, tie up any loose ends within the company, and be prepared for any unexpected occurrences.
Have up-to-date company financial information
Having accurate and up to date financial information for your company, such as balance sheets and income statements, is essential for creating a succession plan. This information is used to develop the fair market value, which is used to generate the asking price, and it is also used to assess the financial strengths and weaknesses of your company. Furthermore, completing a financial valuation is also important because it gives you an idea of the current value of your business, as well as the potential amount of money you stand to gain from the sale of your business. Having a firm understanding of these figures will help you financially plan for your years after you exit the business.
Consult a Professional
Professionals can provide knowledge and expertise in areas where you may have little experience, such as the latest industry trends, specific financial details, legality issues, as well as confidential marketing expertise. When seeking professional help with the sale of your business it is imperative you find someone that you are comfortable doing business with. This will allow you to establish a good working relationship that will provide a beneficial outcome to all parties involved.
Exiting the business is inevitable for all business owners. When that day comes those with a well articulated succession plan will be prepared for the smoothest transition and command the highest asking price for their business. Selling your company is the culmination of the years of hard work you put in to building and operating your successful business. Those who have a clearly defined exit strategy and a professionally developed succession plan in place will be the ones who stand to benefit the most from the process.