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Being a Business Owner is Not a Job

It is predicted that 10,000 Baby Boomers will turn 65 every day for the next 20 years, but in spite of this, succession planning is something many business owners put on the back burner.  Who wants to think about leaving the business behind while they’re still so embedded in it? It’s all too easy with closely-held businesses to work in the business, putting out today’s fires rather than thinking long term. 

Small business owners are often the least prepared for retirement.  As a business owner, it can be hard to really step back and realize that the ownership of your company is not your job.  Your ownership is your investment.  An investment has to grow or die, and has to be able to be transferred eventually.  Although many owners wear the hat of employee as well and get a paycheck from their business, focusing on this distinction is important.  If all (or a portion) of your retirement nest-egg is connected to the eventual sale or transition of your business, it’s even more vital to keep this in mind. 

At a previous HNI U workshop, Cathy Durham from the Capital Valuation Group talked to a group of business owners about the basics of Succession Planning and Business Valuation.  What struck me the most was that although everyone in the room came for the similar reason, their individual situations varied drastically.  Some shared ownership with siblings, some had children they wanted to succeed them (or not), some had identified employees who were looking to take ownership of the business…the list of scenarios goes on.

As Cathy reinforced, there is no right answer in succession planning, just the right answer for you.  There is no cookie cutter approach.  Whatever your scenario, the most important thing is to plan early.  Making a succession plan isn’t saying you are planning to retire tomorrow.  It’s just setting the stage for the optimal conditions when that day comes.  Business value, employee needs, tax conditions, estate planning (and so on) are conditions that business owners can have a considerable amount of control over.  Early planning helps ensure you can extract the maximum amount of value from the transaction and have a smooth transition in ownership -- when you're ready.

 

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Topics: Construction Transportation Leadership / Strategy Manufacturing