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How far in advance should I start to consider succession planning for my business?

I'm probably going to have to sell soon and I haven't planned well. I'd like to hear what people's thoughts. Thanks.

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Answers (7)
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Grover Rutter Mergers, Acquisitions & Va
"We Bring Business Sellers and Buyers Together Confidentially"
Hancock County, OH

The best time to begin succession considerations is the very first day you are in business. While you say that you "probably" are not going to sell soon, you forget two considerations: 1) Death and 2) Disability. All too often I have been contacted by business owners who became permanently disabled, or who were diagnosed with terminal illnesses. These folks generally have one thing in common: they haven't prepared their businesses for sale. To keep your business in the best shape for a sale---at any time, is the smart move. Some suggestions include the following; Maintain good accounting records using up-to-date computer hardware and accounting software. Report all income and don't write off non-business expenses; profits and cash flows are important value drivers. Have an experienced and recognized CPA prepare your business tax returns and annual financial statements. Develop and maintain employee job descriptions and operating manuals for your business. Maintain close contact with your banker(s) and keep them informed about your business progress even if you don't owe the banks money (you want them to have favorable impressions of your business--because a new owner will need to secure financing to pay you for your business). Keep your lease and other legal agreements up to date. Maintain clean and organized offices and work areas. A good outward appearance is also important for your business.
There are many things you can do to keep your business in marketable shape. The ones I have shared are some of the most common. Good luck in your future endeavors.

Apr 3, 2009
Randall Forster
Sperry Van Ness/Martin Commercial Group
Sr. Advisor
IN

It is true, it is never too soon to start planning for the sale of your business. If you managing your business as if you are going to sell it in 3 years, you will have good records and accounting practices in place, the right people in the right positions, a good business plan with goals and benchmarks, an ongoing marketing plan & budget, and, the most challenging of all, groom someone that can take your place. The ultimate test to know if your business is really ready to sell is: can you go on vacation for more than 2 weeks and not have to check your cell phone or laptop for messages every day.

Apr 2, 2009
Leon Parker
New Hampshire Business Sales, Inc.
President - co-owner
Merrimack County, NH

As soon as you start or buy it! We get called to list a lot of businesses where the planning only starts after one or more of the "Three D's", death, disease, or divorce. None of which are usually predictable in advance. If you hire and develop employees with competence, keep good financial records, and maintain the business assets in good condition you are well on the way to having a good plan.
Then talk to a business broker, preferably a Certified Business Intermediary associated with the IBBA, and have them review your situation and suggest things that will enhance the value and salability of the business.

Apr 2, 2009
Ward Adams
Havelock-Adams LLC
Owner/Broker
Maricopa County, AZ

In the best of worlds, starting from the begining or at a minimum two years out is the answer. However, reality is that the decision to sell a business is often determined by influencers that are unexpected. If possible push the placing your business on the market off for at least one year. More importantly, prepare and organize the raw data from which a financial picture can be painted. bank statements, Invoices, expenses, orders, etc. All the daily pieces that go into the day to day operations. Buyers and/or their accountants often want to see what created the numbers in the first place.

Apr 2, 2009
Ken Ducey, Jr.
Princeton Capital Strategies
Fairfield County, CT

It sounds trite, but you really want to prepare from day 1. One example is hiring employees. Employees can be a big part of a business, and if they are under contract it can make your business more valuable. The easiest time to do that is when they are first hired.

To answer your question - It takes anywhere between 6 and 18 months typically to sell a business once you actually begin the process. Before that time, you want to make sure you have certain processes in place, and are organized. If you do not have a strong "second in command", it would be very worthwhile to start grooming one now. If you have customers that do not have formal contracts, and should, you should begin getting those in place.

I believe it would be a very valuable to get a meeting with a business broker or intermediary, and ask them what they would do to your business to make it more valuable. I am sure some things will take no time at all, whereas others might take years.

Ken
www.princetoncapitalllc.com

Apr 2, 2009
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California Business Opportunities
Founder-Broker
Santa Clara County, CA

Prepare your business for sale Now. Start Today! In the first place, you will be operating the best way you know how. That means that you're maintaining a proper Cost of Goods and expense level. The business site is maintained in an appealing appearance and condition. Your financials are in proper order for the prospecive buyer to review in his or her 'due diligence' process. You are in a Win-Win situation from now while you are operating and through the sale, whenever you decide.

Apr 2, 2009
Andrew Cagnetta
Transworld Business Brokers, LLC.
FL
Premium Broker

If you can, two years at least. A business is worth what a buyer will make in the future. The way they predict future earnings is looking to the past. Even SBA lenders want two years of tax returns to finance purchases. So if you can plan to grow and profit for two years then sell, you will maximize the price you can get in the market.

Mar 18, 2009