According to a survey by CNBC earlier this year, while 78% of small-business owners intend to sell their businesses to fund their retirements, fewer than 30% have a written succession plan. At the same time, more than 50% of small business owners are 50 or older. If you have a plan, you’ll know you’ll be ready when the time comes to retire, and your business will be more attractive to potential buyers.
Here are the points you should think about when you’re considering your succession plan.
- Who will run the business? If you’re planning to keep the business in the family, have you talked with the family members you think will desire the role? Will you sell the business? Do you have a particularly talented, trusted employee you believe would make an excellent owner? Now is the time to run the idea by him or her.
- Who will own the business? Will you sell 100% of the business, or will you retain a percentage of ownership? Keep in mind that ownership and the CEO position are two different things.
- Who will transition the new owner, and what will that training look like? A transition to new ownership is a process, and a successful transition depends on good planning.
- How will employees be involved in the transition? You’ll need to tell your employees well in advance of the transition, so they’re prepared when the time comes. You don’t want them to be caught off guard. What roles will they play in the transition plan? How will you help them gain confidence in the new leader?
- How will you prepare your clients for the transition? Your clients must also have confidence in the new leadership. How will you break the news?
- How will your equity be reflected in the sale price? If you have significant equity, this will need to be accounted for.
- Will you structure the transition as a gradual sale or lease? If you offer the new owner options other than an outright sale, it may open up additional possibilities. You’ll need to plan enough in advance to give a potential buyer time to secure any financing needed.
Part of your company’s value lies in how well you have planned and prepared for the transition. If you can show potential buyers or leaders that the transition will be a smooth one, your business will be that much more appealing.