For their book, The $10 Trillion Opportunity, authors Richard Jackim and Peter Christman surveyed 300 business owners who had recently transitioned their businesses. The survey found that only 25 percent of respondents were personally and financially satisfied with their transition. A large majority were dissatisfied with the results of their transition. Not surprisingly, the survey further showed that the business owners who did the most preparation and planning for their transitions had the greatest chances for a successful succession.
Many business owners are inextricably tied to their businesses. It is where they spend the majority of their time. It is what defines them. It is what fulfills them. Contemplating succession is not something they really want to do. But as a business owner, if you want to realize the full potential of the business, you must prepare for your exit both from a mental and a financial perspective.
Most successful businesses afford their owners a very satisfying lifestyle on which the owner and their families come to rely. As part of any succession planning process, it is very important to consider and calculate what your post transition financial needs will be. This consideration will go a long way in determining your succession strategy. For example, if an owner is not financially prepared and needs to maintain a high standard of living, planning to sell the business for the highest possible value may be the only course of action.
On the other hand, an owner who has built a considerable amount of wealth outside the business may have more options because they may not need to sell the business for the highest possible price. Gifting the business to the next generation may be a viable alternative, or even an installment sale to a groomed employee over time could be considered. Proper financial planning for succession opens up more transition alternatives.
The mental preparation for your succession is equally important. Do you have a vision for your life after transition? What will you do with your time? Planning for what a fulfilling existence will look like after your transition makes for a successful succession. One can only play so much golf or do so much fishing. Whether you get involved in volunteer activities, invest in a new business, manage an investment portfolio, sit on boards of businesses or not-for-profit organizations, mentor, or work in some capacity, you need a plan for life after succession to achieve the highest level of fulfillment, happiness, and good health.
Contact us at 215.441.4600 or Email if you have questions or would like to discuss how this topic may impact your business.