In my experience as a succession planner I have encountered several business owners who have expressed a desire to transition their business to either family members or entrepreneurial key managers. Many of them believe they are ready to turn over the reins but all too often they have not considered all of the implications and the vast majority have done very little to facilitate an exit strategy for various reasons.
To get you started or to make sure you have thought through your plan, consider these three very important aspects when developing your exit strategy:
1. Financial Implications:
Do you have enough money to retire or step away from the business? If not, what role will the business play in your retirement? Is your financial security tied to the future success of the business? Can your successor afford to buy you out? Is a sale the best option? What are the tax implications of a sale?
2. Managerial Implications:
To what degree is the business dependent upon you for day to day operations and decision making? Have you identified and prepared your successor to effectively lead/manage the business? What role will you play (if any) once a transition has been made?
3. Emotional Implications:
What will you do with yourself after you withdraw from the business? For many, the business has been their identity and most of the relationships they have are associated with the business.
Remember, an exit strategy is like a relay race: one person must be willing to financially and emotionally hand off the baton and the other must be capable, committed, courageous and willing to take the baton and continue the race. It is a transition, not a transaction.
The succession of your business involves addressing various interdependent issues. Hopefully the three considerations above have stimulated your thinking as to how various areas of your planning can impact your exit strategy, succession goals, and ultimately the value of your business.
How well prepared are you?
Sign up for our monthly e-newsletter to stay informed on how to overcome related succession planning issues.
