Succession Planning for Business Owners: Where to Start
Ashley Klemann, CFP® • Jan 1, 2024 • FINANCIAL PLANNING
If you own your own business, you are likely very busy both growing your business and propelling the day-to-day business operations forward. Consequently, many business owners don’t have as much time as they’d like to zoom out from their daily tasks to think about an exit strategy. If you are thinking about selling your business in the future and wish to maximize your sales price, here are a few things to start considering today:
Understand your Personal Finances
An important first step to determining if you are on track is to work with a financial advisor to develop a personal financial plan. This personal financial check-up will help you to understand exactly where you sit financially as well as what income you would need to generate from a potential sale to sustain your desired lifestyle. This can also help you map out a timeline for when the sale might take place and establish a plan for the funds post-sale.
Assemble a Team
Selling a business is no small feat. Assembling a team of professionals to help guide you through the process is essential. Talk to your CPA and financial advisor and start to develop a plan and a team years in advance of a potential sale.
Identify Potential Buyers
Do you want to pass down your business to a family member? Is there someone working for you currently that has expressed interest in purchasing the business from you at a future date? Understanding not only your market but the profile of a potential buyer is important as you can start readying your business several years in advance of a potential sale date to make it more attractive to a buyer.
Create a List of your Daily Tasks
Most business owners touch all areas of the business in some way. Many of the things you do may not be written down anywhere. Ask yourself, if you didn’t show up to work tomorrow, would your team be able to pick up the business where you left off? Oftentimes, the answer is no. A great step to take is to write down your daily tasks, how to do them and list your strategic partners and how to reach them.
Complete a Valuation
Another essential step is to get an independent valuation of your business and what it’s worth today. This will not only give you an idea of what your business worth, but it will help you in conversations with potential buyers about how the deal could be structured. This exercise will also force you to make sure everything is organized and know what to expect when the time comes to sell.
Starting with these five steps before you are looking to sell your business will make you feel more confident and informed when the time comes, and ensure you fetch top dollar for your business. Assembling a team of professionals to help you plan for this big step is essential. At Heritage Wealth Architects, we specialize in supporting our business owner clients with both their personal and business planning needs. We can help plan for a potential business sale and aid in strategically diversifying the proceeds after the sale.
As always, your team here at HWA is here to help. Please contact us with any questions.