Blogs
Read our blogs on business owner transition.
Has Business Succession Planning Crossed Your Mind?
- Jul 30, 2024
If you are a baby boomer business owner, it’s likely business succession planning has crossed your mind. It’s also possible you have done nothing further about it.
You may be tempted to wait because you feel your current trading is behind last year. But you did that during the pandemic that started in 2020, and we are now 4 years on. Waiting further is just speculating and anything is possible.
Economies go in cycles and most commentators are suggesting that the economy will start to improve, and we are past the bottom of the cycle. This has attracted people looking to acquire skin in the game and ensures there is a healthy pool of capable and qualified people.
A gradual business exit to a talented Business Partner as part of your succession planning strategy, may well be your best option now as opposed to selling 100% of your business at today’s value.
Here are some common questions we get from owners looking to exit (and the answers)
Business is slower than usual, and I need to stay to build things up so I can get full value now?
That may be correct if contemplating an outright sale however if you exit gradually then the incoming person will only acquire a portion of your business at today’s value. Future tranches will be at then value at the time. Given valuations are often calculated on the average of the last 3 or 4 years profit times a multiple, waiting a year for a better result next year won't make the poorer year disappear from a valuation perspective.
The most important thing is that your business has growth potential that can be realised.
Do my systems and processes need to be fully developed in a gradual exit?
No – the talented incoming person will have a skillset to work on this and suggest improvements while they are in the business.
I don’t want to be working full time in my business for the next 4 years.
You won’t be. Under a gradual exit the incoming talented Business Partner will start taking over once you get comfortable and you will start stepping back to 2-3 days a week and then less as times goes on.
Business succession planning is not something to put off to another day. Start looking at your options now and a gradual business exit in today’s climate should be a potential solution to put in the mix.
Mike Warmington is a Director of Platform 1 NZ Ltd who specialise in using executive search techniques to find people with capability and capital for SME business owners wanting to transition.
