Business succession planning is an area fraught with emotion, but integral to the lifecycle of your company. Are you ready to sell? Have you planned for succession? There are five things you must consider before you sell your business.
Good businesses outlive their founders, but very few business developers plan for succession. Business succession is as important as any of the other facets of business and ultimately determines the direction that business owners take.
Many business owners do not really understand the time that is involved in properly developing a well structured business exit strategy, nor the issues that need to be considered and the challenges that face them. Like any well thought out business plan, an exit strategy plan, which is another way of saying how and when you will eventually hand on or sell your business, should cover all legal, financial and personal consequences and has to be introduced and developed over a reasonable period of time—and that could be between three to five years!
Business succession is about maximising value and benefit, and getting the business into shape to be managed by other parties, as well as considering the effects on you as business owner once the sale process is completed. The keys to value are good governance, replicable processes, quality employees and transparency of information: all of these can be achieved by building up the business using proper planning tools and the guidance of professionals in the field.
So what are the areas that need to be considered? These may vary slightly depending on the size and nature of the business, but all can be included in a few main categories:
1. Potential Purchasers
Have you really considered who would be a likely buyer of your business? It is no longer enough to assume that family members will take up the reins; these days there are more options available. There are other avenues for sale: management buyouts, trade sales, and even building the business to the stage where it can be floated. Some of these options are challenging and even gutsy, but can result in a value for the business that is far in excess of that for a small family-held operation.
2. Financial & Wealth Planning
Will the proceeds from the sale be sufficient for your future needs, or will you need to continue to earn income in some form? Is the structure for the business and/or the sale the most tax effective? How can you make sure that family members are properly provided for?
3. Life After Business
How will you deal with not having a business to operate? Will you, in fact, need to be involved for some time after the sale to ensure that the business has a successful handover?
4. Valuable or Not?
Independent professionals can be engaged to conduct an impartial valuation of the business and its assets, not only to give a dollar amount to the business, but also to advise on which areas of the business could be improved to create more value. This can also include making sure assets are properly protected, for example through patent protection or asset insurance.
5. Enduring the Sale Process
Often an emotionally charged time, managing the sale process through to completion needs the support and advice of a team of advisors to ensure that the whole process is properly managed and issues are dealt with smoothly and efficiently. Sale negotiations often fall apart when issues and differences of opinion arise, but are not dealt with swiftly and professionally.
Five things to remember in preparing a proper business succession plan: timing, planning, strategy, execution and then finally, freedom! Oh, and invest in the best advice you can afford: it will truly be an investment and not an expense.
– Suelen McCallum is a Director at dVT Consulting (www.dvtconsulting.com.au)
This article first appeared in the July/August 09 issue of Giftrap, the official magazine of Gift and Homewares Australia (GHA).
