27 Feb Around the Web: A Week in Summary
A recent article from Bizjournals.com entitled “6 Reasons Business Owners Need a Transition Plan” explains the benefits of making and implementing a transition plan and the risks an owner takes when they don’t.
It is a fairly common phenomenon for a business to go to market and not sell. Often times this is because the owner is either unaware of the fair market value of their business, or of the options available to them for transitioning ownership. Selling a business impacts many areas of an owner’s professional and personal life and is therefore a process that should be carefully planned and thought out. To do so, an owner needs to consider their goals surrounding three areas: finances, departure date and successors.
Once these goals are determined they should be the foundation for creating a transition plan in which the owner consults professionals who can assess their business, advise them on their options and advocate on their behalf. A properly executed transition plan can take years, however it can protect the business owner’s interests and keep them from leaving money on the table.
A recent article from Divestopedia entitled “Kids Taking Over the Business? 8 Things to Consider” discusses potential challenges associated with transferring business ownership to the next generation and presents potential solutions for these challenges.
Selling your business can be a complex and difficult process; when family becomes involved it can be even more complex and difficult. With that in mind, here are eight rules to consider if you want to increase the odds of a successful business transition to your children:
- Create a set of rules that your children have to abide by in order to work for the company, and stick to them.
- Do not create a position for your children within the company. Have then in a real position, and make them earn it.
- Pay needs to be competitive. Do not overpay or underpay your children for the job that they are doing. Other employees will notice how they’re being treated and it will affect company atmosphere.
- Make sure your children can grow the business. Selling (or giving) them a company that isn’t growing or that they haven’t been able to grow the value of over a five year period does no one any favors.
- Only give stock to family members who work inside the company. Overlooking this rule can create conflict amongst family members and threaten business growth and investment.
- Sell them the business, don’t give it to your children.
- Let go. It can be difficult to walk away from something which likely has your pride wrapped up in it, however once you sell the business, you’re no longer in charge. It’s prudent to transition your attention to something else that will engage you and let your successor run the business.
- Accept that your children will change how things are done. When they take over the business, it will be in a different phase than when you started it. Don’t expect them to do things exactly how you did.
A recent article from Forbes entitled “Using Tech to Enhance, Value and Sell a Business” explains three ways in which a business owner can utilize technology to make the sales process less stressful and more smooth.
- Increase the salability and value of the business by upgrading its systems. It’s important to acknowledge that the buyers who are interested in purchasing a business are going to reduce the value when they see that they have to implement updated technology and systems themselves. Using up to date software and hardware, digitally stored proprietary knowledge and procedures, as well as CRM and financial management software are going to be key value drivers when selling to a younger, more tech savvy generation.
- Use a valuation calculator to remove guesswork from the valuation process. Using the price of a recently sold company in the same industry or accepting the first bid are not the most reliable way for a small business owner to determine the value of their company. Instead, using a good valuation calculator allows business owners to provide details about their company and includes verified data on comparable deals to provide you with a more accurate value.
- The digital marketplace is an invaluable tool for matching buyers and sellers in the current M&A market.