As a business owner, it’s easy to get caught up in the day-to-day operations and neglect long-term planning. However, failing to plan for the future can have severe consequences, especially when it comes to succession planning. The story of my friend Robert, a successful entrepreneur, serves as a stark reminder of the importance of preparing your business for your eventual exit.
Robert’s Partnership Offer:
Robert had built a thriving business over the years. He brought on a partner. Feeling generous, Robert offered to restart his existing business under a new name and give his partner an immediate 50% ownership stake. The business continued to prosper for twenty-one years under their joint leadership.
The Retirement Revelation:
When Robert decided it was time to retire, he was in for a shock. As he and his partner sought a business appraisal for the value of the business, the results were much lower than Robert had expected. The principal of the valuation firm explained that, without Robert’s presence, the business’s value is significantly less. The problem? Robert and his partner had failed to raise up a team or successor to replace Robert’s key role in the company.
The Financial Fallout:
Robert ended up selling the business for a fraction of what he could have earned had he started succession planning earlier and groomed a successor. To make matters worse, just two years after buying Robert out with seller financing, his partner also sold the business. Once again, the lack of a trained successor hurt the business’s value, forcing Robert to take another 20% reduction in the seller’s note to facilitate the sale.
Lessons Learned:
Looking back on his experience, Robert shared two crucial pieces of advice for other business owners with me:
1. Hire an evaluation coach early. A succession planning expert can guide you in managing your exit strategy years before you’re ready to retire. You will pay a high price for neglecting this early planning.
2. Start early. Don’t wait until retirement is just around the corner to begin succession planning. The earlier you start, the smoother the transition will be and the more value you’ll be able to extract from your business.
Conclusion:
Robert’s story is a powerful cautionary tale for entrepreneurs. Neglecting succession planning can have severe financial consequences and undermine the legacy you’ve worked so hard to build. By hiring a succession planning coach early and starting the process well in advance of your intended exit, you can ensure a smoother transition and maximize the value of your business. Don’t let Robert’s mistake become your own - start succession planning today.
Harry T. Jones
P.S. Shortly, we will be publishing my new book. Until then, I am considering a “beta” test group at a greatly reduced cost, to coach a group of entrepreneurs through the succession planning process. This will be a six-month group built on the concepts of a peer advisory board or mastermind.
Imagine establishing your legacy over the next twelve months with a trusted coach who has walked where you are now. In return, I will learn a lot from you!
Interested? Email me harryt@cultivatingimpact.biz and just put “Interested” in the reply line. No commitment. I will keep you informed.
To your legacy business!
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