Running a business is hard. It takes so much time, money, and energy that it’s difficult enough to maintain family and social life, physical health, and personal growth. Who can afford the time and money to make a succession plan?

We understand many business owners see succession planning as an expense they simply can’t afford. In reality, it’s a profitable investment you don’t want to miss.

Succession planning is important for many reasons, but the one often overlooked is that it can increase the cash you take from the business today and ensure the future sale of the business.

How? Here are 5 ways you can profit from a succession plan.

1. Strengthen Your Negotiation Position

Every buyer is going to put your company through a due diligence process. By having all the information they need readily available, organized, and up-to-date, you’ll know what your business is worth and be able to justify your asking price. 

2. Sell Your Business, Not Your Job

Any aspect of the business that depends solely on you is not something that can be transferred in the sale and is not valuable to your buyer. By having a succession plan that includes your employees, suppliers, investors, and customers, you’ll capture more value in your business and minimize interruptions to your business operations as you look for a buyer, conduct negotiations, and transition.

3. Be Opportunistic

A succession plan will make your business very attractive to potential buyers and enable you to capitalize on good offers whenever the opportunity arises. If someone makes you a good offer to purchase your business today, they may not wait for you to get everything in order.
 

4. Give Yourself Options

Do you want to compete for buyers, or do you want buyers to compete for your business? One of the easiest ways to increase the number of potential buyers for your business is to have a succession plan that will make it easier for them to acquire the financing they need to purchase your business.

5. Pay Less Tax on the Sale

How the actual transfer of business shares and assets takes place can be structured in a variety of ways, which can affect how much tax you will pay on the business sale. A succession plan will help you plan this in advance so you will receive the maximum return on your business sale and minimize tax.

On the other hand, if you don’t have a succession plan:

• You’ll have more trouble attracting buyers.

• You won’t know the value of your business nor be able to justify your asking price.

• You won’t have a plan to transfer its value in the sale or maintain its value during the transition process (or any other interruptions to operations).

• Interested buyers may back out during a lengthy due diligence process or struggle to find financing to purchase your business.

• You might miss out on easy opportunities to get a higher return for your business, including reducing your tax burden.

Not sure where or how to start? A couple minutes on a call with Freedom For Founders will get you started in the right direction.

Author 
Name:  Simon Fallows
Company: Freedom for Founders
Website: www.freedomforfounders.com
Email: [email protected]