Succession Planning for Women Business Owners
Starting a business is an exciting and very busy time, when you are focused on getting the endeavor off to a good start. Who has time to think about “succession planning” when you are busy developing a business plan, leasing space for your new enterprise, ordering inventory, and designing a logo. And, of course, it’s understandable that you aren’t thinking about retiring from your brand new business. But a wise woman would consider succession planning as a valuable tool that can help to ensure that she reaps the rewards from her investment in her business and avoids unnecessary turmoil.
A succession plan is a plan that helps you to get your investment of time, money and energy out of my business when you are ready to retire or move on to another career or phase of your life. Generally, this succession plan involves selling your business. Some entrepreneurs, such as the founders of Google, are wildly successful and have the opportunity to sell their business to the public. But most entrepreneurs will have more limited opportunities to sell their businesses and, as usual, those who prepare have more opportunities than those who leave their fate to chance.
So start preparing even as you start your business. Identify categories of potential buyers: your competitors, your vendors and suppliers, other companies in your industry, your employees. Get acquainted with investment bankers, loan officers, accountants and other professionals who support your industry. Build a network of these potential buyers and professionals and develop good solid working relationships with them. They can be a source of information about investors who are looking for opportunities, persons who are looking to get into the business, companies that are expanding through acquisitions. Just as many people find a job through an active network of contacts that they have built over many years, it is likely that you will find a buyer for your business through the contacts that you make, maintain and nurture while running your business.
Make your business “saleable.” Obviously being successful will make it easier to sell your business. Being professional will also make it easier to sell your business. Treat your business like a business. Don’t mix your business and personal finances. Maintain accurate books and records, pay your bills on time, file the necessary tax returns, comply with the applicable corporate and securities laws. Keep up with the Joneses—invest in your business with upgrades and new equipment and employee training. Develop a stellar reputation for treating your customers, employees and investors fairly. Don’t create unnecessary obstacles to selling your business with short sighted decisions.
It’s a bit like selling your house. Potential buyers who come through the house on Sunday afternoons will be less inclined to make an offer when they notice that the outside of the house needs a new coat of paint, the honeysuckle hedges have not been pruned in years and boxes stored in the basement are water stained. You and your realtor should not be surprised when the buyer wants to pay less for your house after the inspector points out that there is termite damage on the back porch, the chimneys are not capped, and the retaining wall is no longer vertical. Likewise, you should not be surprised that potential buyers of your business are put off by a rundown workplace and grumpy employees. And you should be prepared for the buyer to insist on a lower purchase price when the professionals conducting due diligence for the buyer discover that you are conducting business in Georgia but have not filed the required paperwork with the Georgia state authorities, that you do not have a license for some of the software programs that you are using, or that some of your former employees who lent the company money received and still hold options to purchase stock in your company.
Don’t assume that your children are going to take over the business and buy it from you. Far too many entrepreneurs ascribe their passion and enthusiasm to their offspring and are personally and financially disappointed when their children have no interest in working in the family business. And even those whose children willingly embrace the role of second generation owners frequently are unable to transfer the business to their offspring in a manner that maximizes the possibilities of continued success. Succession planning involving family members can be a complicated process and should be undertaken with a full understanding of the difficulties and potential problems and appropriate professional assistance.
Write down your succession plan. When do you want to retire from this business? What will you do after you retire? What steps can you take toward these goals? Some of the steps may be simple and easy to implement, such as hiring a good bookkeeper and accounting firm or attending a trade show every year. Others may take years to develop, such as identifying younger employees who might want to be the next generation of entrepreneurs. But, if you include this type of succession plan in your business strategies from the start, your chances of a happy outcome certainly will increase.
Succession planning is an important component of business planning. You’re not relying on social security to fund your retirement and you’re not relying on FEMA to replace your roof after the next tornado. So don’t rely on fate when it comes to dealing with this important aspect of your business. Include it in your business plan from the start.