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Few business owners have plans in place for exiting their business. Only 49% of business owners have done no planning at all and 83% have no written succession plan.* Many businesses start the process but few have seen it through. What’s your plan, will you pass your business on to a family member, sell to an outsider, or perhaps to an internal management buyout?
What is a Succession Plan- It is the process of developing a written plan for the day a business owner decides to step down from their leadership or ownership role in the business due to a voluntary or involuntary departure.
GOLDEN RULES OF A SUCCESSFUL SUCCESSION PLAN
Rule #1 - Know your options for exiting the business – 66% of business owners say they don’t know all the available options.** Which option is best for you will depend on your objectives and business size.
Rule #2- Know the true value of your business – Use your CPA/Accounting firm or a valuation service.
Rule #3 – Select and prepare the right successor – One out of three business owners have not established a successor development plan. **
Rule #4 - Put it in writing – A buy-sell agreement is a legally binding agreement that requires one party to sell and another party to buy a particular ownership interest in a business in the event of a “triggering event” such as death, disability or retirement.
Rule #5- Review the plan at least every 3 years – Many business owners have stale agreements in place, leading to underfunded agreements.
We are able to help you formulate a plan, address the funding, and with our strategic alliance partners help you develop a plan that best meets your needs and overall objectives.
Sources: *Exit Planning, State of Owner Readiness Survey, 2018, **Mass Mutual Owner Perspective Study, 2018