You’re relatively young, you’re relatively healthy, and your business is doing well. Sure, you want to retire someday, but you still have time to put your succession plan in place. There’s no rush.
Or is there? “I tell my clients whether they are going to retire in three years or 30 years it’s so important to have this document in place,” says Marie J. Grasmeier, a CPA and owner of Grasmeier Business Consulting in Fort Myers.
A succession plan not only helps business owners prepare for the future, but it also provides a safety net should something unexpected happen. “People, unfortunately, get disabled, they get sick, they pass away, or they have a major argument with their business partner, and they don’t have a plan in place,” says Grasmeier.
This can cause headaches, confusion, and even bigger issues. “In the worst-case scenario, the business ceases to exist,” she says.
So, you want to start preparing for the day you’re ready to step away from your business—or when life forces you to before you’re ready. Here are Grasmeier’s top tips for putting together a succession plan.
Don’t wait until you’re a certain age. “You should do it now,” says Grasmeier. “Business owners tend to focus on day-to-day operations and cash flow and meeting deadlines. Thinking about ‘bad’ things is not something they want to focus on. But taking the time to put this plan in place can not only help transition the ownership when you’re ready, but it can also ensure you have adequate cash flow when the time comes and help the business handle unexpected events.”
Think of succession planning as another form of coverage for “what-ifs.” You have life and business insurance. You have a hurricane plan in place for your company. This is another piece in the preparedness puzzle.
Talk with the experts. Grasmeier helps clients determine their short- and longterm goals and build a plan around them. She also helps connect with them with other professionals if needed, from attorneys to insurance agents.
“There’s a core team of advisors that any business owner should have,” she says. “Make sure you have a good team and listen to their input.”
Tap a successor. You might be lucky and already have a family member or trusted employee who’s interested in taking the reins. If they’re still at a more junior level, now’s the time to start preparing them for their future role.
“Start mentoring this person,” says Grasmeier. “Train them and give them responsibility so they can ease into that eventual ownership role.”
If you don’t have an obvious successor, you’ll have to find a third-party outside buyer. A business broker can help connect you with interested buyers.
Understand what your business is worth. An accredited, third-party business valuation firm can give you a true, unbiased opinion of the value of your company, which will be important when you’re ready to sell off your stake in it.
“Some business owners think their business is worth more than it really is, and they don’t take any offers,” says Grasmeier. “And at the end of the day they don’t have a buyer. Do an analysis to take a really good look at your business and try to step out of that ownership view you have sometimes.”
Document your desires. “Put the plan in writing,” says Grasmeier. “Then review the plan annually to make sure it still reflects your intent.” This helps ensure that any changes to the timing, successor, or transition process become part of the official paperwork and plan of action.
Keep your business healthy. Just like you schedule an annual physical for yourself, you want to make sure your business has regular checkups so it’s in good shape for its eventual transition.
“Find what your weaknesses are and try to improve them before it’s time to sell the business,” says Grasmeier. “Upgrade your systems, review your processes, talk to your employees, train and mentor your staff, and review their compensation packages. You want to make sure you’re competitive and look good.”