Why Your Business Needs A Succession And/Or Exit Plan

While reading the September 2019 edition of INC Magazine, I was surprised to learn that a small percentage (21%) of the companies in the 2019 INC 5000 have list succession plans, and an even smaller percentage (12%), have a plan but have not identified successors.   Therefore, two-thirds of the fastest growing private companies in America are at risk of a major disastrous, disruptive event.  While the INC 5000 companies have grown extraordinarily fast, in most other respects they are typical of the general private business landscape in the USA, and probably the world.  I’m guessing that at least two-thirds of you don’t have a succession plan.  That adds up to a lot of potential clients for me and my ActionCOACH colleagues.

Why do you need a succession plan?  There are numerous reasons, some of which include:

  • As mentioned in my blog Why You Should Prepare Your Business To Be Sold dated 10/23/2018, A business that is designed and built for the owner’s exit will provide protection to the business’ team and the owner’s family. There are too many instances of businesses that failed after an owner’s disability or death.  The potential for destruction of value, jobs and fortunes is reason enough for you to prepare your business for your exit.”
  • A long time ago, a very wise insurance broker explained that a business owner in their forties or fifties is eight times more likely to become disabled than to pass away before retiring.
  • A business that is prepared for succession and owner exit is a stronger business.
  • If at some time in the future you sell your business to outside potential buyers, they will be attracted by the increased potential to retain the company’s human capital.
  • If at some time in the future you sell the company to your employees, the key employees are more likely to remain. The result is a company with a much greater potential for longevity and ability to retire the financing used to purchase the business.
  • For all these reasons a business that is prepared for succession and owner exit is a more profitable, valuable business.

One of the main focuses of the ActionCOACH coaching process is planning.  Among the many types of plans our clients have is a succession plan and, depending upon their age, an exit plan.  If you wish to protect your business should you become incapacitated or prepare your business for your exit and earn more money until you decide it is time to exit, my colleagues and I are ready to assist you.

Why You Should Prepare Your Business To Be Sold (Even If You Don’t Plan To Sell It)

One fact I often site is that on average, 10,000 baby boomers in the USA turn 65 every day.  This has been going on for the past seven years and will continue for another eleven years.  This fact presents two major opportunities to the business world:
  1. What products or services does this huge portion of the population need as they become “senior citizens?”  And they are living longer.
  2. Many Baby Boomers are business owners. Their businesses will eventually be sold, transferred, or they will use some other form of exit in the coming years.
This leads me to the main point of this blog … preparing businesses and business owners (even if they are not Baby Boomers) for their exit, even though they have no plan to exit soon.  Here are the top six reasons you should prepare your business for exit:
  1. Maximize – A business that is prepared for the owner’s exit will be much more valuable than a business that is dependent on the owner’s day-to-day contribution to operations. During ActionCOACH training we learned that a business owners’ product is the business, not the product or service of the business.  Therefore, we coach our clients to invest a major portion of their time toward working “ON” their business, rather than only working “IN” their business.  An owner’s prime responsibility is to design and create a business environment that enables their team to succeed.
  2. Money – A business that is prepared for the owner’s exit will be more profitable than a business that is totally, or partially dependent on the owner’s involvement. Owners need to design their operations to maximize the leverage of their and the team’s time and talents.
  3. Time – The owner of a prepared business will have more time and freedom to pursue other interests, be they business or personal.
  4. Harmony – We all seek work-life harmony. A well designed, prepared business enhances their owner’s ability to achieve work-life harmony.
  5. Contribution – A well prepared business will deliver more value to its customers, clients, patients, team, owner and community.
  6. Protect – A business that is designed and built for the owner’s exit will provide protection to the business’ team and the owner’s family. There are too many instances of businesses that failed after an owner’s disability or death.  The potential for destruction of value, jobs and fortunes is reason enough for you to prepare your business for your exit.
One of the main focuses of the ActionCOACH coaching process is preparing our clients and their businesses to be sold.  If you wish to prepare your business for your exit and earn more money until you decide it is time to exit, my colleagues and I are ready to assist you.