A lot more than 50 percent of most small-business owners are 50 or older, based on the U.S. SMALL COMPANY Administration. That means a lot of America’s 28 million small-business owners are arriving at that point within their lives when they have to look at a transition for his or her businesses.
A survey earlier this season by CNBC and the Financial Planning Association discovered that while 78 percent of small-business owners plan to sell their businesses to invest in their retirements, less than thirty percent have a written succession plan. That’s not really a recipe for success.
An excellent plan covers both human-resources areas of a transition and the financial details, especially if your succession plan is meant to generate the amount of money you will go on during retirement. It’s also an excellent idea to get a succession plan in the event that you plan to sell your business to improve careers.
Use Make-a-Will Month to Plan Your Small-Business Exit Strategy
There are lots of points to remember when you sit back together with your lawyer and accountant to draft your succession plan.
Let’s consider the people aspects first. Your succession plan could envision maintaining your business within the family, which likely already knows your business and brand. Their knowledge could ensure continuity despite a change in leadership. But make sure you carefully talk with members of the family before you designate a family group successor to be sure they have the same desire and passion for the business enterprise as you do.
Many small-business owners assume their kids want to dominate their companies, when actually their children have completely different dreams. If one young child wants to stay static in the business however the others don’t, you may want to have a discussion about how exactly the equity available will be divided.
If your kids don’t want to possess or lead the business enterprise, you may then want to see if among your employees does. Employee loyalty could be difficult in today’s world, but shop around your company and see who has been there the longest, who you can trust and who shows the most passion for your business.
You can consider selling the business enterprise to that employee in your succession plan, or retaining family ownership while allowing this employee to perform the business. Understand that the Ford family, which still controls 40 percent of the voting power in Ford Motor, hasn’t always offered a member of family the CEO position.
The transition to new leadership — and perhaps ownership — won’t happen overnight. Make sure you set aside a satisfactory transition period and let everyone in key positions know very well what that timeframe is. Revealing the framework for the change might help show your employees you are putting in enough time to help make the transition as smooth as possible.
How exactly to MAKE SURE YOUR Business Survives another Generation
In your transition planning, hold a gathering with employees to tell them about the change and have you questions in what the change opportinity for them. When you have investors or other financial backing, additionally you must tell your stakeholders about the transition. They can’t be caught off guard. Discover what they have to be confident in the change of leadership and consider what that you can do to inspire that confidence.
You need to also consider your clients and how they’ll fare in the changes ahead. Consider what kind of support you will require for customers, if they will find out about the transition and who’ll break the news headlines. Should it result from you or their regular company representative? In the event you both make a visit personally?
On the amount of money side, if you’ve experienced business quite a long time, you have substantial equity available, which will have to be reflected in the sale price. That may mean rather than an outright sale, you structure the transition as a gradual sale or a lease. Either option can offer you with money stream and lessen the financial burden on the brand new owner.
The SBA’s 7(a) loan program might help a professional buyer finance the purchase of a business over as much as 10 years. But other styles of finance may also be needed, for instance, to get the building where the business operates, upgrade its equipment or maintain a credit line during the transition. Normally it takes some time to place these financial tools set up, although the option of financing through alternative companies is streamlining that process considerably.
Eventually, enough time will come to release and not simply hover from beyond your corner office. You’ve chosen your successor and you must let her or him maintain control. With the proper succession plan set up, it must be a smooth transition.
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