7 Resources You Can’t Succession Plan Without!

Business owners and CEOs have come to rely on a team of people to guide their company to success – from vice presidents to administrative assistants, from consultants to subcontractors. Each of these resources has a different area of expertise they bring to the whole. When you’re thinking about exiting your business, it’s important to take the same kind of team approach by consulting a variety of professionals to help you prepare for and execute on your succession strategy.

Business valuation expert: This is one of the first professionals you should consult, five to 10 years before you’re anticipating your exit. They can estimate your business value and what it will take to get more money from the sale of your business.

Does a single client make up more than 15% of your revenue? Do you bring in the majority of business? Do you need to be ‘on call’ during your vacation to field questions and address issues? Answer no and your business value goes up!

Financial planner: Next, sit down with your wealth advisor to see whether the estimated value for your business can fund the retirement you’re dreaming of. If not, they can help you make adjustments to your spending patterns, your investment portfolio or point you back to your business valuation expert to  increase the value of your business.

Executive Coach for Succession:  The process of selling a business is tough. You need to build a strong management team that can run or grow the business, profitably and sustainably so you can fund your retirement. The process is fraught with uncertainty and stress, and it can get emotional really fast – for you, your buyer and your employees. This resource partners with you to develop your management team, help you navigate the emotional highs and lows and plan a rewarding exit and next phase of life. This is what we do at The Leadership & Legacy Group for our clients.

Certified public accountant: Selling a business has all kinds of tax implications. Your CPA will be able to help you figure out how to minimize your tax liability so that you can get more of your wealth from your business into your retirement account.

Estate planning attorney: This professional will help build the appropriate legal structures to minimize your personal tax liability after your death and protect your loved ones and other philanthropic organizations important to you.

Business attorney: You probably already have an attorney who helps you with legal decisions and concerns that arise when running your business, including stock purchase decisions, buy/sell agreements and more. If not, you should! But when it comes to succession planning, this is the person who will advise you on the legal aspects of a transfer of ownership and prepare the appropriate documents.

Funding sources: Research shows that in our post-recession economy, the majority of small business owners will need to finance the sale of their business themselves, as most buyers don’t have a wad of cash sitting in the bank ready to invest in your business, and they don’t have enough collateral to get a bank loan big enough to finance the purchase of a business. As a result, owners who really want to facilitate a sale would do well to investigate other potential funding sources including private equity firms or venture capitalists. The bonus for using funders such as these is that they provide money and expertise to ensure the business continues to be successful and profitable after it changes hands.

Insurance agent:  You can borrow against the value of a life insurance policy to fund the purchase of a business. Owners can purchase key man insurance, to ensure the stability of the business or its’ sale in the event of the owner’s unexpected death. Your agent can help you figure out how to leverage the resources best to accomplish your goals.

When is it time to start talking to these resources? At least 5 - 10 years before you’re ready to actually exit. Their guidance will give you a better understanding of the transition process so that when a buyer approaches you, you’re ready to jump on it, and when you are ready to seek a buyer, you have positioned yourself for a smoother and more profitable sale.

Most people wait too long to build their team and are unprepared to retire when it becomes desirable or necessary for them to do so. Others don’t have fallback plans in place when the economy tanks, the buyer walks away or other trouble arises.

To serve this growing demand for service, we’ve recently launched a Succession Planning Roundtable as a subgroup of the award winning Society of Financial Services chapter. We bring together local experts in all of these professions to discuss the challenges we see in our individual areas of focus, and to share ideas and perspectives that can benefit the clients we serve.

If you want to learn more about these experts, or have a particular need, please call or email me for a confidential conversation about your situation. We’ll decide who might serve you best and I’ll make an introduction on your behalf. I’d be delighted to do that!

Contact Abby Donnelly, The Leadership & Legacy Group at 336.458.9939 or email Abby@leadershiplegacygroup.com. We look forward to hearing from you!