An outdated plan only provides a false sense of security for your business
By Dave Driscoll
I can almost see you rolling your eyes, but now is the time for business owners to revise your succession plan. Yes, now, while you are very busy navigating the uncertainty caused by the COVID-19 pandemic. As readers of my column, I’m certain you already know the importance of having a succession or exit plan and you’ve created written documentation to protect your financial future, your family, and your company. Right?!
An important aspect of succession planning that is often overlooked is reviewing and revising the plan regularly. Once you’ve put in the time to envision and plan how you’ll eventually leave your business, you have a framework for implementation. However, your framework needs to be inspected and revised because it’s built on shifting sand. Even in so-called “normal” times, economic, business, and personal circumstances change in ways that render your original plan less-than-sturdy. Your financial future, and that of your family and employees, should not be dependent on a plan that has become flimsy and outdated.
Solid succession goals should be based on your values…what are your non-negotiables when you eventually exit your business? What legacy do you hope to leave? How do you intend to spend your Life Beyond Business™? Who do you want to take care of and to what degree? The significant components of these answers probably won’t change much over time. But you may be surprised how many details shift when it comes to implementation.
Adaptability is a key element of a good succession plan. As 2020 taught us, dynamic thinking and “planning” for contingencies is essential. Realistically determining and planning for your most likely exit scenarios and developing your resources creates options to reach your goals via various paths. How can your company pivot to stay relevant as society or your industry changes? Are there competitors who would be logical prospective buyers…or others that you would not consider selling to at any price?
Reassess your value gap regularly– is the realistic value and selling price for your business enough to support the lifestyle you want after the sale? Investing in a market valuation is essential to objectively determine your business value. This knowledge will allow you to work smart to increase the business value if needed.
During difficult times, we are in survival mode. But priorities are also made clear. Take a moment to reflect on your wants vs. needs regarding eventually leaving your business. Be sure your succession plan protects those needs. Your plan should also address your wants; realizing they are important but not essential gives you freedom.
We often hesitate to evaluate uncomfortable subjects honestly and fully and therefore, miss the opportunity to take manageable steps to avoid the worst-case scenario. Remember you don’t have to – and shouldn’t – do this alone. Utilize your professional resources to assess, brainstorm, and strategize the many elements of your succession plan. Your accountant, financial advisor, and banker can offer unique insight regarding challenges and opportunities facing your business and your personal planning. Tax considerations, such as corporate structure, should not be ignored.
At least every two years, you should carefully review your succession plan and revise as needed. Clarity often emerges from uncertainty, so seize the chance to strengthen your succession plan AND the eventual outcome for you and everyone impacted by your business.
Dave Driscoll is president of Metro Business Advisors, a mergers & acquisitions, valuation and exit/succession planning firm helping owners of companies with revenue up to $20 million sell their most valuable asset. Reach Dave at DDriscoll@MetroBusinessAdvisors.com or (314) 303-5600. www.MetroBusinessAdvisors.com