What Does Your Small Business’ Future Look Like?
As a small business owner, you have spent an immeasurable amount of time and energy to create a profitable, healthy enterprise that will last for years. But, have you specifically considered the future of your business without you? Whether retirement is far off in the distance or quickly approaching, you must seriously think about how your enterprise will continue to function after you leave the workplace.
Unfortunately, succession planning is not an action that is often taken to ensure the continued growth of businesses. A recent article from the National Federation of Independent Business cites a FPA/CNBC survey: merely 30% of small business owners actually create concrete succession plans.
The Small Business Administration also claims that business exit strategies are not often considered by owners. Be among the small group of professionals that plan for the future. Implement a plan that will ensure the long-term operations of your small business.
Start Early on Your Succession Planning
Even though retirement may not be currently relevant to you, the time inevitably will come when you exit the workforce and leave your small business. When this occurs: have an established plan for the new presidents, directors, or chairpeople of your business so that it does not suffer in your absence. This can only be achieved if you create a succession plan, now.
As you procrastinate developing a succession plan, you also procrastinate achieving your desired goals for your professional and personal futures. Indeed, one of the common myths of succession planning is that it is not pertinent to your financial prosperity. This and more are discussed in a later section of this blog post.
You must set important goals with adequate time to actually achieve them. In order to complete unprecedented tasks in your industry or increase the value of your business to a certain amount, create milestones far in advance of when you hope to accomplish them. Therefore, a proper succession plan is necessary to ensure that your employees and assets continue to grow to reach your goals.
In a Guide to Business Succession Planning, the Ohio Employment Ownership Center also discusses the steady loss of options that occurs when succession planning is not performed. Simply put: creating an exit strategy, now, will only help you to achieve the growth that you envision for your small business.
Know Your Options for Transferring Ownership of Your Business
Basically, a succession plan comprises the guidelines or protocols that will be followed when you retire from your small business. This includes a multitude of nuances and details that seem to complicate the process. One of the most common aspects of a succession plan is a transfer of ownership (see this Succession Planning for Business Owners page from Fidelity Investments).
Of course – there is no universally effective way to place a new owner at the head of your small business. Every situation, including yours, is unique. As the current owner, you have several options for people that will continue your business’ operations:
- Family members
- Children that are involved in the business
- Co-owners or members of a board
- Employees or subordinates on your staff
- An individual or a team of individuals
While choosing the correct candidate for your small business’ future ownership may be easy for some, it may be extremely difficult for others. These different options suit a variety of needs for small business owners. A prime example: your current business structure may favor selecting family members rather than board members for future ownership.
Again, choosing the future ownership of your small business is merely one aspect of the overall strategy for your exit from the workplace. This transfer of ownership depends upon the way in which you would like your business to continue – as an independent venture, a valuable asset of another business, or a pool of resources for your retirement.
To fully understand all of the factors of your situation and investigate your options, it is crucial to maintain a team of experienced advisors with whom you are comfortable. These include accountants, lawyers, as well as financial advisors that specialize in business financial services.
Do not attempt to create a succession plan without the professional examination of your assets by financial advisors. With years of experience and education in the field, industry-leading professionals do not let you be misguided by myths about succession planning.
Don’t Be Fooled By Common Misconceptions
Even though creating and implementing succession plans is not necessarily popular among small business owners, there are several myths about the way in which you “should” exit your business. It is important to be aware of these misconceptions in order to not miss opportunities for growth and achievement.
These are just a few common myths along with actual solutions:
- “There’s no need to create a plan, now. Your whole future is ahead of you.”
- As discussed at the top of this blog post, early succession planning is necessary to establish and accomplish important goals for your small business.
- “Don’t get caught up in transferring ownership. Selling is the easier option.”
- Selling your business entails a comprehensive strategy to attract investors and potential buyers as well as a variety of sales methods. See Deloitte’s report on succession planning and refer back to the OEOC’s Guide for more information.
- “Whenever I’m ready to leave the business to them, my chosen successors will be ready.”
- The need to inform, train, and prepare your chosen candidate or candidates for future ownership of your business is always necessary (Fidelity Investments).
- “Once I’m not the owner of my small business, I have nothing to do with it.”
- With appropriate planning and actions, your exit strategy can include collaboration with, or advisory duties for, new owners or chairpeople (Fidelity Investments).
Build a Promising Future for Your Business
The ultimate goal of succession planning is to ensure that your hard work and dedication to your small business is not wasted. If you do not have a clear vision of how your business will continue to function without you, your employees and assets will be left vulnerable when you retire. If you do not have specific actions planned for your own exit, you may miss post-retirement opportunities to benefit from years of labor.
As retirement continues to approach you, it is not uncommon to feel overwhelmed at the prospect of leaving your business. Trust a team of financial advisors to guide your through each step of the process.
What Are Your Concerns for Your Business After Retirement?
Tell us all about them with a comment, below. Or, simply contact Magellan Financial to start the succession planning that you need.