As a small business materializes, the last thing most owners are considering is an exit strategy in the form of succession planning. Yet, preparing your small business for future sale or transitioning to a new owner is a strategic maneuver that will lead to better outcomes. The planning process for a successful succession should be considered five years in advance to retire or exit your business.
Advantages of a Business Succession Plan
A well thought out succession plan will help in the process of handing over your business. Advance planning will help you prepare for the future;
- Leaving a legacy for your business
- Continue a service for your community
- Financial security of your family
- Transition the business to family member(s)
- Retirement and Estate planning
Succession planning requires a wide variety of skill and knowledgeable expertise outside of most small businesses capacity. One of these integral, trusted sources to guide you through this process is an experienced Certified Professional Accounting (CPA) firm.
Succession Planning does not need to be an overwhelming, daunting task; it might be easier to break up the process into 4 stages:
Figure out the value of your small business
Before making any other decisions, you need to know the value of your small business. Start by evaluating your revenues, assets, properties, etc. Other factors you may want to prepare are;
- Intellectual property
- Client base
Interested buyers will want to review these items along with the financials and historical information about your small business.
Develop an exit strategy
Succession planning is a long term process of preparation steps to sell a small business. A good place to start is by developing a plan with steps and processes to follow over a long period of time. The goal is to have checkpoints to revisit as your small business grows and changes. A plan will help reduce stress, provide clarity on the price to sell your small business, and remove any rush decisions made later that you may regret.
Getting ready to sell your small business
The moment has arrived you’re ready to sell your small business. This is when you need your small business spruced up and appearing at its best. Have your checklist handy to make sure all the “t’s” are crossed and the “i’s” are dotted. A few items;
- Fully trained employees
- Technology is current
- Operation systems are organized and efficient
- Financial structure is clean and current
- Online accounting software is current
- Systems Documentation is organized and current
- Turnkey ready
At this stage consider an advisory board of experts to help prioritize the process and assist with any unexpected glitches that may arise. Your team members may include your mentor, a Business Valuator, Professional Accountant, Lawyer, sales professional, technology professional.
Selling your small business
All the preparation steps have been completed. At this stage, you may need a lawyer and your accountant to help complete the sale of your small business. If necessary, your advisory team can help you with negotiating and any other details pertaining to the sale of your business.
A well thought out succession plan will help you and the new owner transition smoothly. Over time the planning process helps to maintain positive relationships with employees and business partners.
If you are thinking of retiring or selling your business consider a succession plan. The advantages of developing a plan will help you make important decisions around ownership, maximizing your business value and develop tax strategies. Contact Banka & Company, CPA to help you through your succession planning process.