The Canadian Federation for Independent Business reported in January 2023 indicating that 76% of small business owners are planning to exit their business in the coming 10-years. Of these only 9% have a succession plan in place. Given this, what are you doing to facilitate selling your business?
Planning the sale of your business can be overwhelming. Especially when juggling the day to day of your business.
If you are planning to sell or transition your business in the coming 5-10 years, you need to start actively working on this plan now.
At Firefly Insights we have helped many business owners navigate succession, not just the technical and legal pieces but also the messy family dynamics, the emotional issues, the fear of who you will be when you aren’t running your business anymore. HBO’s Succession may be a fictional family and business but those tensions are real in many many businesses and families.
From our years of experience working with business owners making a transition here are the 5 things to focus on to start the transition process.
- What’s your business worth?
You’ve watched Dragon’s Den and done the math on your own business – 5 x EBITDA, right?
Well, …. maybe.
Most of my clients are usually surprised (some happily surprised, some disappointedly surprised), when they have their first independent valuation done. I remember when I got the report for on my first business valuation for a business that I had spent YEARS building…. How little it was actually worth – to someone else. Yes, that’s a big aha moment. Or on the flip side, this company is really valuable and who’s going to pay that?
Once you know what your business is worth you can start to plan. Is that an amount you can retire on? Is that an amount your kids or your employees are going to be willing to pay you?
Get some quotes for business valuations, choose a valuator and know your companies’ value.
2. Leadership and Governance
Who is going to lead the company when you step back? Is there someone who is showing the interest and ability to lead, have you had a conversation with this person/these people? Is there a need to create a different leadership model than what you have now, perhaps something more collaborative? You may not have a clear successor, that’s ok, make it part of your process.
Governance is the system of rules, practices and processes that determine how a company is controlled. Putting into place policies to hard code your values into the business before you leave may be needed. You may also want to give thought to the structure of the Board of Directors, are you sitting on the Board? Who else would be?
Finally, as you transition from a situation where you as the owner made all the decisions to a more complex leadership and Board structure, do you need a governance matrix to make it clear to everyone who makes what decisions.
3. Identify any subconscious blockages that may sabotage the sale of your business
This is a big one that most people overlook. Sit with your thoughts and feelings about selling your business, what comes up? Write in a journal about it, or share with a trusted friend of business advisor. Feeling through these emotions will help the process more than you can even know.
In my experience about one out of every two businesses have some unsaid piece that gets in the way.
Give yourself the time and space to dig in and see if this is the case in your business. Is there tension between the siblings on who will take over. Are there inactive shareholders from years ago that need to be moved out? Are there difficult conversations to be had?
5. Know thyself
Your business will struggle to transition if you aren’t ready to let go. Create a vision for what you are going to do next. Personal coaching and support are important as you navigate this transition. Find someone you trust to work through these issues with. Finding an identity outside of your role as the business owner and entrepreneur is really hard.
Looking for support on this journey, book a free 30-minute consultation here.