While family business owners often want to pass on their business to the next generation or, at least, to sell it for a handsome price to a willing, motivated and competent buyer, the reality is that it is not easy to transfer a business to the next generation or, for that matter, to another corporation or entity. While it has often been believed that business succession difficulties primarily concern taxes, my experience has been otherwise. Even where governments clear the way for business transfers, the emotional effect of loosening control over a business that may have taken a lifetime or even generations to build can be traumatic.
If you own a business or intend to long range, here are some issues to take into account.
In an interesting short on-line article, “How Do Strategic CEO’s (and Owners) Work Themselves Out of a Job?” www.thiswayoutgroup.com, Kerri Salls makes the point this way:
“When you want to sell your business, you want to command the highest possible value. For your business to merit the highest possible valuation, you must prove to the business appraiser and your prospective buyer that the value is in your business, not in you the owner…”
Salls goes on to note that the skills involved in divesting yourself of your business are very different from the skills involved in startup. During startup, the business owner does anything necessary himself or herself to make it work. Here is what Salls recommended you do if you want to sell.
“…1. Create systems for everything. If you have systems, make sure they are documented.
2. Delegate everything. When your business can operate day-in and day-out without your hands-on oversight, you have a money making machine that will attract buyers…This one change takes time…Identify the three things you absolutely love to do in your business and the three things only you can do. Delegate the rest…
3. Develop a succession plan throughout the company…
4. Plan for scalability….”
Scalability is an interesting concept. It means that the potential buyer sees vastly increased revenues without increased investment of time and money. If you have it all there, you might be ready. If not, you have a roadmap. Then, know where you want to go after. Many business owners start over with a new one. If so, the term is “serial entrepreneur.”
Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.