Succession Planning for Business Owners: How Do You Want to Exit Your Business?

Darling bees are truly amazing. They offer various lessons in organisational theory. The queen may be considered the head of the colony and yet, curiously, she may have little or no “say” in how she is changed. If she dies or goes missing, the beehive create a new california king. Actually they create a number of potential full larvae and the first to mature kills all the others. However, the hive may also determine that the queen is too old or is failing and needs to be replaced and so they create a new queen. Or conditions may be so favourable that they decide to divided the hive and they create a new full and the old full has to find a new home. In each case, it is the hive that “decides” on the fate of the queen, not the princess or queen. Storeboard

It allows you to wonder, does not it, what would business be like if the staff decided in order to was time to replace the best choice? Of course, creating a new leader in business is not as simple as feeding a larva noble jelly… 

Just like the queen, though, there are four ways that a business owner can leave a business. These four exit routes we will call the four Ds (rhymes with Bees).

First of all, similar to the queen bee you could Die operating. This may well not be the choice of choice but if the time comes you won’t care much by what happens next (probably). And therein lies the condition – what happens to the business afterwards?

It is usually kept to your family to work through and if they don’t have the will or capability to deal with your business then it’s going to difficult for them and your dedicated employees. You may have made provision for this situation with an insurance plan, shareholder’s agreement and interim management provision, but it’s not well suited for the morale of your employees. Naturally, even with the best laid plans, it might happen anyway, so it’s always best to prepare yourself with insurance, records and contingency plans in place. Yet , by choice, I assume this may not the exit most people are trying to achieve.

The second option is Dissolution. That is, at some point you choose to retire and you decide to close the business. All the hard work you’ve put in to building up will have been for free as your legacy fades away. Even greater, if you have employees they would lose their livelihood. While this may be preferable to death in service, I actually would suggest, as it involves a conscious choice, it still seems an attractive sad way to leave.

Another is Disbursement – that is lobby someone to buy it from you. It could be your management team, a dealer, customer or competitor or perhaps someone who fancies working your business. This could be the biggest payday advance you’ll ever have. It may also be the most disappointing pay day likely to ever have if you don’t put the necessary preparation in to making your business attractive to a buyer.

There are many of factors that go into making the sale of your business as rewarding as possible. Firstly, and perhaps obviously, the better your business is economically, the more it will be worth. This means good margins (for your industry), strong cashflow and data of growth and development potential. It also means having good financial management systems in place: a budget (that is used), a cashflow forecast, a capital plan, a real estate plan, a marketing plan, an income plan, and so on.

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