A business owner's net worth and future income depends on the value of your business, whether you plan to sell it or pass it along to the next generation.
As you look towards your future, succession planning is the key to growing and getting the most out of your business.
Watch the video below, or read on for more information:
There are over four-and-a-half million companies that are going to be hitting the market in the next 10 years – worth over 10 trillion dollars. And 70-to-80 percent of companies that currently hit the market do not sell.
As business owners, you want to increase your chances of being able to sell your company. You want to be able to differentiate yourself from that company down the street, and not be one of those 70 or 80 percent.
How do you make your business more attractive, stand out from the pack? You’ll be competing against millions of other companies, potentially – and you do that by planning for your exit.
If you don’t plan, you’re likely going to minimize the value for your business, which may not be sufficient to live the rest of your life as you wish. And if you wake up one morning and decide "I've had enough of my business and I want to sell it," you're not going to maximize the value you get for the business.
We recommend at least a 3-to-5 year plan to get you to the point where you're ready to sell the business – where the business is attractive for sale – and you maximize the value for what you've spent your life building up.
An exit planning strategy integrates not just the business goals, but it also looks at the personal goals and the financial goals of the owner. It's integrating all three at once:
- Building the value of the business, so owners can get the money they want and need for retirement, or whatever life looks like after the sale of the business.
- Aligning their personal goals with that succession, as well. What are they going to do in the next chapter of their lives?
Succession planning is for any privately-owned, closely-held business, no matter whether they're going to gift it to their family, sell it to their family, sell it to private equity companies, sell it to a competitor, sell it to an ESOP, which is an employee stock ownership plan. No matter how they're going to transition the business, they need to plan for it and they need a team of people working together to maximize the outcome of the transition of the business.
There's not one professional out there that can do this on their own. You need a strong team that can give you specific advice, whether it's tax advice, estate planning. Maybe you need a family coach to help work through those crucial conversations and the conflict that might arise from this. You need a financial advisor or a wealth manager to really help you with that plan after succession.
Having the right team of people that you trust is really invaluable. In putting together that collaborative team, we're all working together to build the value of the business, preserve the wealth of the owner and help make that exit successful.
Andrea Brady, CPA, CEPA, and Andy Kahn, CPA, MBA, CFP, CEPA, are Certified Exit Planning Advisors and lead Concannon Miller’s Exit & Succession Planning Team. Learn more about our Exit & Succession Planning Services here.