Many family business owners have a hard time imaging their businesses running without them at the helm, but others are looking forward to transferring ownership when retirement or a new venture beckons. One aspect that needs to be addressed is to safeguard the value of the business.
Convenience Store News’ article, “How to Create a Transferable Family Business,” outlines several concepts that will motivate you to take the necessary actions to ensure your business will be transferable for the value you expect.
Get the Big Picture. You need to keep the business moving in today’s business environment. Define your vision for both the company and yourself, so you’ll have a core for meeting threats head-on. Without it, you may be trapped in your business or not get the value you anticipate when you exit. Be certain that you and your business are prepared for the future. Protect owner value and increase the likelihood of a successful transition to a new owner.
Start the Planning Process ASAP. Commit to an assessment and review planning process, and review your current strategic corporate and personal planning to reveal threats and identify opportunities. There are four steps:
- Examine your personal and business goals and objectives.
- Ascertain your level of financial and mental readiness.
- Consider transfer options.
- Review your financial, estate planning, and investment plan to be sure it’s aligned with your transition plan and family wealth plan.
Decide on Valuation Strategies. Determine how much money you’ll need to cash out. Understanding the value of your business and how it fits into your financial and estate planning is vitally important. Work with a business broker and find out what your business is really worth.
Look at Industry Trends. Evaluate the trends in your market to see what future owners may value in a company they purchase. Investigate the competitive position and comparable values in the industry and gather industry intelligence to help with your preparation for making decisions when the opportunities arise.
Calibrate Your Company’s Owner Dependence. The value you get for your business may be based upon the level of control you want to maintain. The less your company depends on you, the higher the value of the company.
Find and Keep Executive Talent. Talented managers can be a real value driver for your company. Look at your key executives rank in terms of skill and ability to operate the business. Be certain you have the best people on staff to help the business grow and motivate them through incentive-based compensation that is in sync with the company’s goals and succession plan.
Leadership and Collaboration. You don’t want to do this without the help of independent advisors who can help you, your family and your executive talent as you go through this process. By setting goals for the business, addressing key strategic issues and planning for the unexpected, you’re more likely to have a successful transition.
Include an estate planning attorney from Cottrell and Jacobs as this may be one of the larger assets and there are tax implications that must be planned for in advance of the sale.
Reference: Convenience Store News (October 4, 2016) “How to Create a Transferable Family Business”