by Tony Vidler
Succession planning is about working out how to exit your business at your preferred time, in your preferred way, and hopefully at your preferred price.
Doing that successfully is quite a journey, and involves significant thought and planning, and detailed execution. It doesn’t usually happen through sheer good luck!
In Part 1 of this two-part article we covered the first 3 steps in some detail, and Part 1 can be viewed here: http://financialadvisercoach.com/2014/03/17/the-6-steps-of-succession-planning-part-1/
To summarize though, the 6 steps of a full succession plan are:
1. Establish the Owners Objectives
2. Understanding Where The Value Is
3. Building & Maintaining Practice Value
4. Creating the Sale
5. Completing the Sale
6. Personal Planning & Legacy Issues
Having clearly identified what your objectives as an owner are, understanding where the value components are within your business that can be managed to build and maintain the value for optimal pricing and exit is the first half of the challenge.
To active the ultimate objective of the succession plan though a sale and exit has to actually happen.
Creating the Sale
This step of the process is often focussed on the “consideration” aspects alone, and while the structure of the settlement of the sale is very important, the elements outlined above are just as important. The consideration, or how people will actually pay you for your business, will typically come down to one of the following (ranked from most favorable to least desirable in my view):
Completing the Sale
When it is time to begin the actual sale process you will need to be prepared with:
Personal Planning and Legacy Issues
At this point it is finally all about you! Of course you will have prepared for this if you have been diligently creating the perfect succession plan, although it is surprising how many professionals get to this point and only then begin thinking about how to structure their own affairs.
Minimum considerations should include:
As you can see, putting together the optimal exit from your business can take as much thought and preparation as the building of the business itself. Of course a business owner doesn’t have to go to all this trouble – and most don’t. Most go for a simple rule of thumb valuation that is typically accepted within their particular sector of the profession and go for little more than an asset sale.
The difference between doing that and working to a full succession plan where you sell a well structured business that is attractive to new investors can be, and usually is, many extra zero’s. In your pocket.
Who said hard work doesn’t pay?0