Not that talk. The talk about you and the business you own. Like it or not, one day you will leave your business. Planning for it is something many are uncomfortable with. Some never do, and that can not only cost them a great deal of money, but it can also cause a great deal of pain for their survivors. Yes, your survivors; I know a business this happened to, a 50-something business owner who one day simply fell over and died. When everything regarding his estate was completed, the family also lost the business. This was all because there was no plan for what happened when the owner no longer worked in the business. That may seem like an extreme, but it happened. I knew the family personally, and the idea of transition planning was something they didn’t want to discuss. They should have.
Fear is often the primary reason why many don’t address this issue early on in their business life cycle. They simply don’t want to address this inevitable aspect of life. To some extent that is understandable. However, if for no other reason, you should do what you must to put that fear aside and begin the business transition planning process today. Not tomorrow, not next month or even next year. We don’t know what will happen next; being responsible and planning for anything, especially if it involves those you will leave behind, should be enough to overcome the fear.
It happens to all of us who own a business. At some point, our working life stops. For business owners that bring on additional challenges. Specifically, what will happen to your business when the inevitable occurs. Generally, this involves one of the following:
- Selling Your Business to a third party
- Retaining your business and hire someone to run it for you
- Passing it on in some way to a family member or partner.
- Establishing an ESOP or Employee Stock Ownership Plan
Regardless of what you decide one thing is certain, you have to include thinking of yourself in this process as well as your business. These two are closely tied together. Let us look at the process
As with anything worth doing right you start out by making a plan. In business, we call this a succession or transition plan. It is important to be as thorough as possible in developing the plan. There is no off the shelf solution for this, and your plan must be as unique as your business. Finding a quality helper in this will not only involve multiple people, but it is also something you cannot expect to get free or from a volunteer service. You will have to work with:
A Business Advisor – A Professional skilled in developing business value. Ideally, this is a person who can help train and educate chosen successors, improve the value and performance of your business while developing your plan and help you execute the strategy of succession. This should be someone other than your Attorney or Accountant.
Your Attorney – You needed one when you set up your business, and you’ll need one now. A variety of legal issues will arise that will need to be handled by your attorney. Don’t try and do this alone.
Your Accountant – Ultimately taxes will be a factor in whatever you decide. Having your accountant involved in how you proceed from a financial reporting aspect because of those taxes, is critical.
Others – Possibly your Banker, Insurance Agent, ESOP Consultant, or others who are service addresses the specific value of your business and you.
Succession or Exit planning is not something you wait to do. Ideally, you start it the day you start your business. That rarely happens. A smart and prudent owner will begin their succession planning at least 3-5 years before they are thinking of leaving the business. If you plan on leaving within the next year, it isn’t too late, but your plans may change. Regardless, now is the time to start. You can learn more by downloading my free publication, “It’s Inevitable; One day You Will Leave Your Business.”