We came across an interesting article in Entrepreneur magazine entitled: “Millions of Small Businesses Will Soon Be for Sale. Here's How Smart Entrepreneurs Are Cashing In”. If you missed it, you can check it out HERE.
Among the many intriguing statistics it references, the one that stuck out to me the most is this one: 70% of small business owners have no formal succession plans, despite nearly a third planning to exit within five years.
If you’re an entrepreneur reading this, odds are very good that you’re in that 70%. And we think it’s important to know that without a formal succession plan, odds are also good that you are not going to get top dollar when you decide to sell your business.
Why is that percentage so large?
Because creating a succession plan can be a daunting task for several reasons:
- It often represents the largest transaction in your life.
- There is no second chance to do it again if you get it wrong.
- There often are family dynamics that are in play, even if your family is not actively involved in the business.
- There are very few financial professionals who are skilled enough to help you get adequately prepared.
To that last item, there are 672,000 professionals who hold the Certified Public Accountant (CPA) designation, and 100,000 professionals who hold the Certified Financial Planner® (CFP®) designation, yet only 6,000 who hold the Certified Exit Planning Advisor (CEPA) designation.
Consider that exit planning is a team sport; to do it properly, you’ll want to involve different advisors with different skill sets (ie all of the above and more). Furthermore, proper exit planning isn’t just about getting the business in tip-top shape before you sell it. It’s about preparing all three legs of the business owner’s stool:
- Business planning (how attractive is the business to a buyer?)
- Financial planning (how much income can you expect your assets to provide, post-sale?)
- Personal planning (what will you do with your time and energy when no one calls you boss?)
If you haven’t given enough thought to these 3, then proceed with caution. You’ll likely find a buyer for your business when you think you’re ready to sell. The question is…will you be able to maximize the sale price and properly monetize your life’s work? Don’t wait until you’re a year or two away from selling; the time to start is right now.