When a Succession Plan is Not in Your Plan Maybe it’s Time for a Re-Think.
But My Business CAN’T be sold because it’s nothing without me!
Does this sound familiar? Is this you?
When a Succession Plan is not in your plan, I suggest you think again.
I’ve heard this plenty of times and have many real life examples of why it is incorrect. I am yet to come across any particular person who has such stand out skills that cannot be replaced. Sure you may be good but there is someone just as good or better coming along … and there is a fair chance if you are that good someone is copying you right now.
If you have the time and the inclination every business can be prepared for sale, even yours. So if you have a business that is really just a job that pays you the equivalent of a salary there is not much you can do. However, if you have a real business and you do nothing then you are potentially leaving a significant retirement fund behind. You see, if your business makes a profit over and above a fair remuneration to you then it has a market value … someone will invest in it!
If your business returns a profit over and above the cost of resourcing the business with competent employees, read on because succession planning is an option worth considering.
They won’t do it as good as me!
Perhaps they won’t but if they do it 80% as good will that still turn a profit? And if you replaced yourself with two people both doing 80% of your results will that produce 160% of what you produced? Maybe, maybe not but you can see where I’m going.
Let me tell you a story I have heard time and again when visiting businesses which “are unsaleable”. When I start talking to the team I get comments like “If the boss would only stay out of it we would get a whole lot more done”. What this tells me is there are replacements for most businesses quite often already working within.
My General Manager could probably run my business but he couldn’t afford to buy it!
Two very big opportunities here!
Firstly, if you have a competent person in your organisation then there is an opportunity to groom them to run the business … IF AND WHEN YOU CHOOSE TO. This not only makes your business more saleable but turns it into an investment rather than a job, again only when you choose to.
Secondly, it gives you the opportunity to sell the business to your key employee. He or she doesn’t need to necessarily have the money to buy it, just the interest in owning it.
I have assisted small businesses in succession planning by introducing key employees as owners with the following results:
- Sale prices at or above market prices.
- Original owners partnering with key employees resulting in actual profit earned by the owner improving even after they own a lesser share.
- After a period of co-ownership, financiers are willing to fund the employee to buy out the owner based on the security of the business.
- In one instance an employee has been able to purchase a business worth in excess of $5m without having any security to buy in.
And it’s able to be replicated!
I have facilitated a sale of the same business that over a period of nearly 40 years has had seven separate sales involving a revolving door of “partners” buying shares, eventually buying the whole business and then in turn on selling to new key employees … all in all a transition of the business in total to new owners three times. All grown from within the business and all have enjoyed very successful financial outcomes.