The following is an excerpt from a book I'm currently writing,Values-Based Succession Planning.
This book will be of value to small and middle market business owners who wish to successfully sell their business. Because I am a music maker, and was an owner of a school music dealership, the stories, lessons, and insights in this book come from a personal place in my heart. I’m dedicating my work to all the brave souls who have the courage and passion to promote the art of music making, the most noblest of causes. Here’s to the music retailer who helps connect the $18 billion global music products industry to the citizens of the world.
While Paul Simon may have wrote the song 50 ways to leave your lover, there are only 4 ways to leave your business. Transfer ownership to your family, key manager, third party, or liquidate the inventory. Many business owners instinctively believe that their best opportunity is to sell to a strategic seller. This position comes from the fact that most employees , and working family members, don’t have the assets to buy out the owner. While this fact may be generally true, as you’ll later read in this book, with a longer time horizon, transferring your business to an insider is often the better route to take and could be highly advantageous for the exiting owner on both financial and personal levels.
The first challenge which needs to be faced, is how you can unlock the wealth in your business. The key is to prepare your business to run without you. Remember, for many owners, their business is also their alter ego and often your key management team is still too reliant on you. Unless you have the right team in place, with proper training, and retention agreements in writing, your business is worthless to any potential buyer. Family or non family manager.
A definition: Succession planning is a process for identifying and developing new leaders who can replace old leaders when they leave, retire, or die. Wikipedia.
A values-based succession approach focuses on what you value, rather than what you own. Success happens when your personal values, and your financial life are in harmony.
In this book you’ll learn the principles of values-based succession planning, which will help you align your personal values with family and the business of family. While focusing solely on your cash flow may not necessarily translate into increased value, focusing on the value of your business will always translate into increase cash flow.
“…I don’t believe your business is your life, though it does and can play a significantly important role in your life. But before you can determine what that role will be, you must ask yourself these questions: What do I value most? What kind of life do I want? What do I want my life to look like, to feel like? Who do I wish to be?” —Michael Gerber, E-Myth
Managing your business exit will require some of the most important financial decisions of your career. Yet succession planning is often delayed. In fact 2/3 of public and private companies admit they have no formal plan in place to replace the CEO.
Have you heard the rolling 5 joke?. Joe tells you last year that I have a firm date to exit my business. It will take place exactly 5 years from now. So two years later you ask Joe how’s his progress is going? His reply. I’m right on track. In 5 years, I should be out.
Because succession planning requires a multidisciplinary team of advisors which includes: financial advisor, attorney, accountant, valuations expert, insurance consultants, delays are inevitable. It’s hard to traverse journey without a clear road map. The question is why do business owners delay asking for succession planning help?
The answer is threefold:
2- Time it takes to complete
3- Emotional decisions which are required.
If you are “stuck”, you’ll enjoy reading my deep dive in our next newsletter. If you’re not a subscriber visit our home page to receive our Succession Success e-newsletter.
© 2017 Jaimie Blackman. All rights reserved.
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