Over 55% of small business owners say that retirement is their motivation for selling, according to a survey conducted by BizBuySell.

We often encounter business owners who express a desire to retire by the end of the year but lack a succession plan. Unfortunately, without a solid plan in place, retirement remains a distant dream.

Meet Julie, one of our clients and a savvy business owner planning to retire and exit her business within the next 3-5 years. Julie’s foresight led her to seek our advice a few years before her planned retirement.

When Julie approached us, we explored her situation with two critical questions:

  1. Internal Succession: Does Julie have someone internally prepared to take over her business? While this may seem like an HR issue, the absence of a suitable successor can lead to significant costs in finding and training new talent, or even worse, risking the stability of the company with the wrong choice.
  2. External Sale: If Julie doesn’t have an internal successor, is she prepared to sell to an external buyer? Selling to an external party involves a rigorous acquisition due diligence process, during which potential buyers evaluate the company thoroughly before making a decision.

Our conversation with Julie then focused on crafting her exit strategy. She needed to decide whether she wanted a clean break from the company or a gradual transition. This decision involved determining whether she would leave immediately or stay on in a reduced capacity, perhaps as a consultant, as new management took the reins.

Another concern for Julie was the potential departure of her top employees when she retired, which could leave her business adrift. To prevent this scenario, we discussed the importance of implementing a compensation program to retain key talent. Such a program goes beyond monetary incentives to include growth opportunities, development, flexible work arrangements, vacation time, benefits, and more.

Once Julie had clarity on her succession plan, whether through internal succession, hiring, or selling, we could address another crucial aspect: determining her asking price. This involves considering factors such as the company’s financial performance over the past 5 years and the value a buyer would see in the business.

To ensure a smooth transition and maximize the value of your business when you’re ready to retire, it’s essential to plan for your business’s future. Start early, involve key stakeholders, and seek professional advice.

You need to think about who will take over, how to keep your best employees, and what your business is worth. Planning now can help you smoothly transition and get the most out of your hard work.

Step back and assess where there are gaps and unanswered questions in your plan. Develop a strategy to address these gaps and communicate it to your team.

If you’re ready to move forward and unlock the value of your business, contact me, and let’s create a succession plan together.

 

 

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