Have you ever thought about what is going to happen after you are not working in your business anymore? Often we see business owners that are working so hard IN their business that they forget that part of working ON the business is thinking about succession, in other words, planning for the day that you are not there every day.
We like to have our business owners focus on planning their retirement 8 to 10 years prior to when they would like to retire. But if you’re closer than that – it’s not too late to make a plan for leaving your business. There’s 6 critical elements that it’s important to think about:
The first step is to pick a departure date. This is not to say that on that exact date you will have nothing more to do with your business, but putting that stake in the ground and making a plan will help you and your successor. If you have a spouse or partner, this is something that is going to be a team effort: grab a bottle of wine, sit down where you have some focus, and make a plan for you and your family.
PERSONAL FINANCIAL NEEDS
How much are you living on right now? If it’s $150,000-200,000, then factoring in extra travel, changing family needs, etc., how much will you need on an annual basis to live comfortably? If you have a personal financial planner, this would be a good person to help you with these goals.
Who is going to take over your business when you retire or are no longer with us? This is something that we work on with our business owners often. There’s really only 4 options on who can succeed you:
- ESOP: An Employee Stock Ownership Plan allows the employees to own the business.
- Sell the business to a third party that you most likely don’t know.
- Transfer the business to existing employees that may be able to take over the day-to-day operations.
- Pass control of the business to a son, daughter, or other family member.
With the exception of a third party, are these people ready to lead? Are they ready to continue your legacy? A coach can help train this person to be the leader that you dreamed they could be, and give some consistency when it’s time to turn over the business.
It’s helpful to do a preliminary business valuation assuming that you are not going to leave the business for the next 8-10 years, or sooner if you are closer to retirement. Remember, the definition of a business is “a commercial, profitable, enterprise that works without you.” If the business doesn’t have a value without you there, it’s time to take some action.
CASH FLOW ASSESSMENT
Planning on increasing future cash flow and profits can help you have a vision of where you think it can go. If there is no value in the business without you there, it’s time to set some goals and have a neutral third party (like a coach) hold you accountable for those goals.
ROLES IN YOUR BUSINESS
This is one that we help business owners with often. In many smaller businesses, and some mid-sized businesses, the owner fulfills multiple roles in the company. The owner is often the salesperson, the bookkeeper, the operations director, the human resources person, and the marketing director. If you are not working in the business, who is going to do those job functions? You will need to have a plan to replace yourself.
Is it time to have the conversation about what happens with your business when you are no longer working in it? Our coaches are here to help. Contact us today for a one-hour no cost, no obligation conversation with our experts today.