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You worked hard to build your business and make it a success, but what if it’s time to consider the next chapter? Familiarizing yourself with the succession planning process can help you turn the page smoothly. There are three main things to keep in mind when considering if it’s time to transition your business to its next phase.
- Determine your personal financial situation. Before moving forward with succession plans, get a clear understanding of your personal financial situation. Business owners often overlook this, but the importance cannot be overstated. Many entrepreneurs think they know their personal financial net worth, and feel as if they have adequate resources to maintain their desired quality of life into the future. However, get a professional financial planner to validate those assumptions. A professional review can spare you the devastation of moving through the succession planning process only to discover a shortfall in the proceeds needed for future living expenses.
- Consider business and ownership goals. Do you want your business to continue? If so, how do you see it evolving? Who do you see taking the reins from you? Think through these questions and make sure you express your goals and wishes to those affected. If there is a second or third generation family member you want to transition ownership to, tell them. If there is a management team you think would be interested in purchasing the company, now is the time to ensure they have the interest and the financial wherewithal to acquire an ownership stake.
- Determine what your business is worth. Just like your personal financial situation, you may think you know what your company is worth. Get a professional valuation that produces a reasonable estimate of the business’ value. Once you have this value, you can hold it up against your personal financial needs. If the numbers align, it is a sign that the succession process can begin. However, if they don’t match up the way you’d like, examine and implement strategies to build value in your business.
Implementing these tips will provide you with the necessary information to conduct a smooth transition for your business.
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