Here are a few important reasons why preparation is integral to selling or transitioning your business.
By Glenn DiBenedetto
The sports community watched in awe as Tiger Woods won his fifth Masters Championship last April at Augusta National – a stunning feat as he secured his first Masters title in 14 years at the age of 43. The remarkable victory follows 41-year-old Tom Brady’s unprecedented sixth Super Bowl championship in February, when he became the oldest quarterback to win the NFL title.
How are these star athletes making history and still winning championships at this stage of their careers? Undoubtedly, both men have invested years of planning and preparation, enabling them to remain at the top of their games today. As Tiger Woods eyes his next title and Tom Brady dodges rumors of retirement, what lessons can business owners learn from the storied careers of these professional athletes?
Focused, ongoing planning and preparation for the future is a fundamental component of any business. Most entrepreneurs spend the majority of their time immersed in the business’s operations and day-to-day management, neglecting a succession plan. Recent studies suggest 83% of business owners lack a formal business transition plan and 80% of business owners interested in selling their company are turned away by potential buyers for not being “market-ready.” Ongoing planning and preparation are essential for long-term success – whether you are aiming to capture your next national championship or transition your business after years of hard work.
Planning and preparing for the succession of your business should be addressed from the start and updated throughout the entire lifecycle of your business. By following best practices, you can potentially double the value of your business in a few years, helping to ensure that your company has a long, successful lifespan.
Here are a few important reasons why preparation is integral to selling or transitioning your business:
Create a game plan for the transition process.
Transitioning your business requires meticulous planning and attention to detail, so it is critical that owners understand the process from start to finish. Whether you are selling your company or transitioning ownership to one or more trusted family members, friends or employees, designing a game plan will help identify opportunities for improvement and define value. From initial assessment and valuation to closing the deal, mapping out your exit plan requires a significant investment of time, often several years. Getting a jump-start on the planning process will help business owners greatly enhance the entity’s intrinsic value.
Expect the unexpected.
Forty percent of entrepreneurs are not prepared for a forced exit. When life happens and owners are faced with illness, death or simply general fatigue, they are left without a substitute to step in the game and assume all responsibilities of running the company. While owners may have several good employees, these workers often lack the training and skills needed to lead the company. An exit plan helps identify potential successors and provides them with the appropriate training and intel necessary to take over if the unexpected happens.
Transition seamlessly to life’s next venture.
Challenges are inevitable, whether in the form of sand traps or unwilling successors. Fortunately, mindful exit planning can greatly reduce any obstacles. With attention, consistency and a proper strategy, closely-held entrepreneurs can preserve their legacy and maximize the value of their greatest investment – their business.
After a lifetime spent running a business, business owners deserve nothing more than reaping the rewards of their hard work. While you may not be donning the coveted Masters green jacket or heading to Disney World after a Super Bowl win, ongoing planning and preparation will allow you to get the most out of your business venture and fully enjoy the next phase of your life.
Glenn DiBenedetto, CPA, CGMA is a co-founder and principal of Business Succession Advisors in North Andover, MA. DiBenedetto has over 40 years of experience providing M&A business advisory, tax and auditing services to businesses, individuals and private companies.