Selling Your Business in the Next 15 Years?
If you’re thinking about selling your business in the next 15 years you’re not alone. An estimated 7.2 million businesses currently owned by baby boomers reaching retirement age will be competing for buyers. This inevitable dynamic will result in a huge glut of businesses on the market in the coming decade and a half, and a much smaller pool of buyers interested in snapping them up.
What is currently a Seller’s market (due to pent up investable cash in banks, investment groups, and private buyers from the economic downturn of the 2008-2010), will very soon turn into a Buyer’s market—on steroids.
As the ancient proverb says, “The best time to plant a tree is 20 years ago; the second best time is NOW.”
How to Sell Your Business for A Premium Price
Success will come to those business owners with a plan for transition and a well-considered strategy for making their business a highly desirable acquisition target, rather than something to be discarded. This is true whether you plan on taking your business to market or selling it to people you have already identified.
Benchmark Business Group, as part of its suite of services, brings you more than 75 years of experience in helping business owners plan for their ultimate exit from their business, and to realize the most value and security from their years of hard work and risk.
Compared to the huge array of activities and demands required to run a business, Succession Planning is most often relegated to the back burner, if it even makes it to the stove. Yet, ignoring it can become the most costly mistake a business owner will ever make. Unfortunately, many business owners won’t realize how costly it is until it’s too late to do anything about it.
Having a well-designed and orchestrated plan is critical for effective and successful continuation of a business, especially a small, family operated or closely held business. Here are some initial considerations:
Tips for Succession Planning
- Plan early. Developing a succession plan early will help smooth the transition and provide a greater range of choices in a number of areas. You may think the plan won’t be implemented for years but unexpected events and unforeseen factors may move the timeline up dramatically.
We recommend using the Value Builder System to understand the current value and sellability of your business today. It doesn’t matter when you plan to leave your business, it’s important to Know Your Score Now and understand the market value of what you’ve built. This complimentary assessment will help you understand exactly what drives the value of your business and how you can improve that value to create your ideal succession plan.
- Involve family members in the planning process. Developing a succession plan and simply announcing it to the family may only bring discontent or resistance when you unveil the plan. Every business, in one sense or another, is a family business. By bringing the family into the conversation early, you may still end up with the same plan, but you will also most certainly create greater goodwill, support, and buy-in as well as have the opportunity to take advantage of other points of view.
- Bring in outside experts to form a team. As you have grown the business, you have no doubt had help along the way. Hiring the right professionals—attorneys, accountants, financial advisors, certified exit planning advisors, and business consultants—will help you ensure you have the best possible succession plan when it is needed. Their expertise will be invaluable as you develop your plan while continuing to juggle the daily demands of your business. In addition, a knowledgeable team will give you a more objective view of the business, the goals you have set, the real impact of challenges and opportunities, and help ensure that all relevant issues are being fully considered.
- Begin setting your successors up for success now. Succession planning requires the careful consideration of how well your business will operate without you at the helm. Even if you have not identified who your successors will be, there are many critical things you can and should do to prepare your business for succession. This will not only significantly aid an internal successor, but dramatically and positively impact the value of your business if the decision is to sell it. These are familiar issues to a professional Business Coach and Consultant and using our services won’t just save you money, but make you money.
- Identify your needs and examine all of the many options. The planning process may seem daunting at first but there are some general categories to keep in mind: the management of your business, the ownership structure of your business (not necessarily the same), your personal financial needs and goals, your family’s needs when you pass, and the tax consequences of any plan. Often, these categories have competing interests. The objective is to develop a succession plan that satisfies all of the needs in a reasonable and compatible way. There are a myriad of combinations, tools, and solutions to consider.
- Thoroughly understand the financial impact. Be sure to develop a financial plan as part of the overall succession plan. It begins with an accurate Opinion of Value for your business, as well as an up-to-date set of business and personal financial statements. From that, your team of advisors can help you assess your retirement income potential, potential gift and estate tax impact, tax impact on the sale and other transfer of the business, and the possible need to make other arrangements to minimize tax or other expense or to cover the part of it that may be difficult to avoid. You don’t want you heirs surprised by a heavy tax bill that may force an unintended liquidation of assets.
- Be realistic, even if it is painful. You may already have someone in mind to buy your business. Before you reach that conclusion, take a step back and consider whether he or she is really the right person to take over management and leadership in the company. In addition, does this person have the financial means to buy your business? Ultimately, selling your business to an outside party may be the best option. A Benchmark Business Coach can guide you through that process, and a Benchmark Business Broker can help you identify potential buyers and advise you on options for structuring a transaction.
Start Your Succession Plan Today
The time for succession planning is now. Don’t delay starting the planning process. The benefits are too great to wait, and the costs of taking no action too high to ignore. In all likelihood, your business is a major part of your retirement plan. Succession planning and having a clear exit strategy is one important way for you to ensure that you have the funds you will need in retirement. At the same time, it will ensure your clients are well taken care of, your employees have stability, and your company will successfully continue on after you leave the business. Contact us today for a free preliminary consultation. A few years from now when you see the blossoming tree you planted today, you will be glad you did it.