If you own a privately-held business today, I have two questions for you:
Sadly, according to a recent article in USA Today, for the majority of small business owners, the answer to both is a resounding no:
“58% of small business owners have no succession plan. Most of those with no plan (78%) blamed their lack of planning at least partially on enjoying ‘managing their company too much to start thinking about a future transition’ while 42% said they were too busy to plan, and 44% felt that succession was ‘too far in the future’ to need to establish a plan now.”
This situation is further compounded by this reality as we have discussed before:
“60 percent of the 15 million privately held businesses in the U.S. are owned by business owners born before 1964.”
This means that about nine million businesses will face some sort of decision about the succession of their company over the next 15 years or so. For the 44% of the owners surveyed who felt that succession is too far in the future, it really is not! The future will be here faster than you can imagine.
These statistics are not only a poor reflection on our business community’s attitude towards responsibility; they represent a dilemma that can be completely solved simply by coming up with a plan.
The issue for many business owners is that they have no idea what their options are or what succession plan makes the most sense for their situation.
Far too many business owners assume one of two scenarios will one day occur:
Both of these scenarios have serious issues attached to them.
First, have you even chatted with your kids about succession? Too often business owners who attend our exit planning conferences only do so AFTER being told by their offspring that they have no desire to take over the reins.
This leads into another issue: Are you sure your child has the aptitude and/or ability to be a CEO? It is one thing to work in the mailroom, quite another to make the leap to CEO.
Not to mention the insult that could be felt by key employees who have been with you for decades if you hand the company over to your child as your succession plan.
Finally, both of these scenarios carry a huge financial burden to the departing owner. Most offspring and key employees lack the financial capacity to deliver the maximum value for your business.
Odds are good you will have to carry paper financing the deal, which most likely will pay you out over a 5-year to 10-year period. If the business falters under new leadership, what does that do to your payout?
For these reasons, we highly recommend to business owners that they thoroughly explore a third option for their succession plan: Transferring the business to a third party via a partial or complete sale.
This option is by far more financially lucrative (in most cases) and removes the burden of hoping that offspring or key employees even want to replace you or doubts over whether they’re capable of replacing you.
“Everyone dies and many people retire to enjoy the fruits of their labor. Succession is not an easy topic for a variety of reasons. It's hard to confront your own mortality and not fun to tell a family member or trusted employee that they won't be taking the reins as your replacement. Still, it's selfish and dangerous to not address these issues. The best way to control what happens to your business -- in many cases your life's work -- is to take the proper steps to execute your plan.”
If you find yourself part of the 58% that have no succession plan, then you REALLY need to attend a Generational Equity exit planning conference. These meetings are not only highly educational, but they often give business owners the momentum to begin their exit planning process. This may not even be as clients of ours, but on their own by going home and having frank conversations with family members about the future.
If you have no exit plan or succession plan in place and/or you lack the knowledge about how to even begin, you should consider attending a Generational Equity exit planning meeting. Held throughout North America, these conferences will give you the knowledge base you need to start the journey to achieving maximum value.
To learn more about our conference, use the following links:
By Carl Doerksen, Director of Corporate Development at Generational Equity.
© 2018 Generational Equity, LLC All Rights Reserved
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.Jay Dinnison, Owner of Sharpe Mixers
Tom Staszak is one of the most professional people I have dealt with in my last forty years of business. You’ve got a great group of people and you have built a truly professional organization.Michael J Polarek, President, Paragon Packaging
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.Larry Moore, Owner, A Company Portable Restrooms
Thanks again Phil and feel free to have a future client call me if they would like a referral. You are a true professional!Andy Graham, Vice President, Modern Heating & Plumbing
We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Greetings Mike. Thank you for the captivating and compelling presentation you made at the Phoenix presentation last week. Over many years in business yours was the most informative and well-presented presentation, on any subject, that I have ever attended! Your energy and enthusiasm combined with your concise and captivating support of your positions with easily understood examples and data was compelling.Pete L.
Michael worked tirelessly, He followed every lead meticulously and urgently to make sure nothing was missed.Robert Evans, President and CEO of Mealtracker Dietary Software
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Terry D. Wickman, President, Keytroller
We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
We will highly recommend Generational Equity and Musa Jagne to any business owner about to embark on the same process.Karen S. Williams, CFO, BW Manufacturing
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.Andy Graham, Vice President, Modern Heating & Plumbing
We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.Jay Dinnison, Owner of Sharpe Mixers
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.Bil MacLeslie, CEO, ipHouse
Bruce and I wanted to take this opportunity to thank Generational Equity for assigning Musa Jagne to our transaction. In Bruce’s words, “Musa did one hell of a job for us!”Karen S. Williams, CFO, BW Manufacturing
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.Robert Evans, President and CEO of Mealtracker Dietary Software
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Generational Equity’s assistance was invaluable in compiling and marketing our business.Bil MacLeslie, CEO, ipHouse
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The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.Terry D. Wickman, President, Keytroller
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