Three questions to ask yourself when succession planning

It’s a fact that 100% of business owners will exit their business. The question is whether or not it will be a planned or unplanned exit. Regardless of where you’re at in the lifecycle of your business, having a succession plan for the next generation of ownership will give you peace of mind, and in many cases, leave you with a more valuable business. 

There are three significant factors when considering options for succession planning:

1. Who will buy the business?

Potential buyers include key employees, family members (both internal), and external buyers. If you’re considering a sale to internal buyers it’s important to engage the parties in the conversation early in the process. This builds engagement and buy-in, increasing the likelihood of a smooth and successful transition. If an internal sale is not in the cards, engaging with an M&A professional 3-5 years before you sell can help you increase both the value and salability of your company.  

2. How will the business be valued?

Your business value can be determined in a number of ways but the key is to know where you’re at today and build a roadmap to where you want to be in the future. Work with a professional to understand the value drivers in your business and industry, and the types of buyers most likely to have an interest in your business. 

3. What role will I play now and in the future?

Last, the role you play today will very much determine the role you play in the future, not to mention the terms and conditions buyers will ask for in a sale. In a nutshell, the less involved in the day-to-day operations of your business the less you’ll need to be involved in the business after a sale. Not only that, but you’ll have built a business that can be sold as an investment to others rather than simply an income replacement. 

Succession planning is a planning tool that will give you peace of mind when the time comes to exit your business, regardless of whether it’s a planned or unplanned exit.