The Need for Proactive Succession Planning
While it may not be the first priority for many business owners, every business will eventually face an exit — whether planned or unplanned. If you don’t take charge of your Succession now, you risk losing control over how and when you exit your business. Research highlights that many small to-mid-sized businesses fail to plan adequately for Succession, where:
• Over 90% of businesses are not sellable in their current format.
• Half of all business owners will be forced to exit unexpectedly, often due to health issues or personal circumstances.
• Shockingly, 67% of business owners don’t know all their exit options, and 78% have no transition plan in place.
Moving from Manager to Shareholder
A key shift in Succession Planning is moving from a managerial mindset to a shareholder mindset. This transition means stepping back from day-to-day operations and focusing on strategic oversight. Exiting your business doesn’t necessarily mean selling it; it could simply mean letting your management team take over. Understanding this distinction is vital, as it helps you plan for a future where your business can run independently of your direct involvement.
Enhancing Business Value and Personal Wealth
Research shows that for around 80% of business owners a large portion of their personal wealth is tied up in their business. To secure your financial future, it’s essential to establish the current value of your business, identify any wealth gaps, and develop strategies to close those gaps. A well-prepared Succession Plan can increase your business’s attractiveness to potential buyers or successors, ensuring a better financial outcome when the time comes.
Why Does Succession Planning Matter?
To accompany this article, I’ve written a more detailed extended 4-page version that delves into the reasons why business owners should prioritize Succession Planning, the factors you need to consider, and the actionable steps you need to create an effective plan. In the extended version you’ll learn much more about the key considerations for successful Succession Planning, which include: 1. Owner Dependence vs. Management Structure, 2. Family and Employee Transition, 3. Risk Management and Contingency Planning, 4. Legal and Financial Documents, 5. Formal Business Valuation, and 6. Business Transferability and Saleability. You can request that article by contacting me, Carl Jarvis, on carl@[email protected]
