Succession Planning 101

Every business owner should be thinking about their eventual departure from their business because they are going to exit their business  one of two ways; Voluntarily or Involuntarily. Voluntarily – you will be able to transfer the business to family members, key employees will buy you out or you will sell it to a third party for maximum value.  Involuntarily – you will be disabled, become critically ill or die prematurely before your exit plan is ready.  So the universal truth is that you will exit your business some day.  In order to do so successfully you must create an exit strategy as early as possible otherwise you and or your family will get pennies on the dollar.

For baby boomers, the clock is ticking.  Today, there are millions of closely held   business owners who are over 50 years of age. If ever there was a good time to sell it is now;  low capital gains rates, the uptick in the merger and acquisition market, historically low interest rates  that makes borrowing costs cheap and supply and demand all are good indicators of a glut of potential businesses to sell. Better do it it earlier than later when there may be more businesses  for sale than buyers to buy.

Here are some questions to ask yourself to see if you are ready to exit your business:

  • Do you know when you would like to exit your business and how much income you will need to achieve your long term financial goals and security?
  • Have you taken the time to find out the value of your business?
  • Have you implemented a strategic contingency plan to insure your business continues without you in the event of a total disability, critical illness or premature death?
  • Do you know how to transfer your business with the least impact of taxation to a third party, family members or key employees?
  • Are you aware of the best ways to sell your business to t a third party while minimizing your tax exposure, risk and that maximizes cash flow to you?
The goal is to start thinking about your departure before a triggering event occurs at precisely the wrong time.

“The journey of a thousand miles begins with the first step” Lao Tzu  so start to work on it now!