My Very Outspoken View on Succession Planning
The buzz, hype, and talking heads concur that businesses should be sold as quickly as you can. To say that I don’t agree is an understatement. This is an expensive mistake and one that can rob you of your retirement as a business owner. Here’s my outspoken view on succession planning.
It’s a glorified form of gambling
Maybe I am being too outspoken on this point, but I see the way that succession planning is typically handled in our industry and it makes me want to ask, what’s the rush?
Actually, I know what the rush is. The people advising these transactions have to get paid.
Many financial advisors make their money via commission when the business is sold. It’s in their best interest (not necessarily yours) to urge you to get the transaction done in 18 months or less. The reality is, it takes at least five years when done by design. Most business owners don’t give themselves enough runway and that’s because they are advised by deeply biased professionals.
Have you ever heard this line? “Multiples are high and cash is cheap – get the sale done now before it changes.” How is it that you own a company for three decades, build up the value in your “investment” and then spend less than 5% of that time to make sure there is a system in place to recognize the value of all that time?
If you were cooking ribs for a barbecue, would you do it this way?
Let’s say you plan ahead and marinate them, season them perfectly, and slow cook them for hours, paying careful attention to every stage of the process, temperature, etc. What will you get? A mouthwatering fall-off-the-bone, juicy, pink-ringed set of ribs to feast on. On the other hand, let’s say you go about it fast-food style. You decide at the last minute that you want ribs so you pop them in the microwave with some barbecue sauce slapped on, and the whole thing takes 10 minutes. True, they’re still ribs but the experience of eating them is going to be totally different.
That’s ridiculous, you say? It’s not even worth comparison? Then why would you do it with your biggest retirement asset — your business?
If you’re neglecting to spend the proper amount of time selling your business — and by that I mean years, not months — you are essentially gambling with what is going to be the source of your prosperity for the rest of your life.
Why succession planning is important
On your journey as a business owner, it can be hard to leave your business. You want to make sure that everything is in place — the employees, the finances, the customers — but getting your business to that point takes work and time. A third-party advisor can help minimize the stress of this process by giving you a road-map with specific steps and time-frames to follow.
You can plan your succession on your own. You know what you want your business to look like when you leave and you have an idea of who you want in place when the time comes. However, think back to when you started your company. You didn’t build your business on your own. You trusted others to help build it around you and with you.
You can’t think of everything, especially when trying something for the first time, and you can’t plan for a situation you have never considered. Timing each transition, understanding the steps, and considering possible obstacles is why an advisor is an important part of a succession.
Triumph Wealth Management, LLC has been helping businesses through transitions for over a decade. We have the experience and knowledge for succession planning because serving those in transition is our niche. Your financial success is breathtakingly important so we want to be more than just your wealth management company. We want to be your guide in designing your ideal future.
To discuss succession planning and how we can help, contact our office at email@example.com to schedule a meeting.