Succession Planning – have you planned your exit strategy?
You may have built a successful business but have you planned your exit strategy?
Preparing for succession may not be at the forefront of every business – but it should be. Having a succession plan allows for employees, owners and the company itself to have a clear direction on how the company will move forward in its life cycle. Often, the best way to explain a concept is to share a real life story. Recently my Father, Phil Singer, and I were published in a nationally distributed magazine called Collision Quarterly. It is directed to members of the ARA (Automotive Retailers Association).
The article describes how our team at Singer Olfert assisted my Dad in the selling of his business a few years back. I will summarize the two-page article and you may click the link to read more about our story.
- We wanted to identify our reason for selling. In our case, Phil had reached his 70’s and was ready to pursue other aspirations and not work so hard. For other owners it may be health or profitability that leads to this decision.
- Consult with a team lead by a trusted Financial Planner. In our situation, my Dad and I partnered with our trusted team. We coordinated the skills of our accountant, lawyer, evaluator and realtor to develop a strategic plan of attack. We set realistic deadliness and goals for the sale of his business.
- Determining the value of your business. With the assistance of our team, we looked what the business was worth on paper and used comparables to evaluate what the market would bare. In our case, we totalled the value of parts, equipment and inventory and evaluated what the goodwill of the business was worth. It was very important that we had kept good books for the past for the past 7 years as this will be key in building a case for the value.
- Who will buy the business? We wanted to find a buyer who would continue to run the company successfully as Phil had spent over 40 years building it. We looked at family and employees and determined that the best route would be to list the company publicly for sale.
- Succession planning takes time. We started planning for the sale of the business years before it sold. We felt that we need to prepare the employees and team for what happens next. In our case we were also hit with new environmental issues that lead to completing Phase 1 and 2 testing on the property for contaminants. We learned to plan for hick ups along the way.
Having a trusted team lead by your Financial Planner is key in the successful succession of your business.
Please click here to read more about our story and how we successfully sold our 40 year old family business.