1 in 10 Leaders Say Succession Planning Is Not Worth the Time and Money It Costs — Here's Why They're Wrong.While seemingly straightforward, succession planning for business owners can take several different forms, each with its own set of pros and cons. You need to understand your options when you inevitably sell or pass down your business someday.

Business owners know a thing or two about working long hours. Without fail, there's always something to do. But what about putting in the time to develop proper business succession planning? Arecent reportfrom SIGMA shows that nearly 1 in 10 leaders believe succession planning is not worth the time and money that it costs. Are you that one? There will be a time when you'll want to transition ownership of the business to another party, and it may be sooner than you think.

While seemingly straightforward,succession planningfor business owners can take several different forms, each with its own set of pros and cons. You'll want to understand your options and how they relate to what you hope to accomplish. No matter when or how you transition ownership, your results will be impacted by how much effort you put into planning.

Related:Succession Planning: It's Never Too Early to Start Thinking About the Future of Your Business

Starting with the end in mind

的一个重要特征highly effective peopleis the ability to come into any given situation with a clear understanding of the destination. It allows for better identification of the necessary steps to achieve a desired outcome. That's business succession planning in a nutshell — or, at least, that's the goal.

If you think success planning is as simple as handing over the reins to family, you'd be mistaken.Only about half of heirswant to take ownership of the family business. That's a stark difference from what business owners actually think, with 67% believing that their heirs want the business. Even if the family member is ready to take over, succession planning for business owners takes time and preparation. Below are five strategies that will help you start planning for succession and the thought that needs to go into it.

1. Carving out the time necessary

In our experience, it's best to start creating asuccession planning roadmapat least three to five years prior to the date of theplanned transition. Without a roadmap, you might unknowingly create hurdles to a successful transition instead of facilitating a clear path to new ownership. In fact, it could even put into question the financial security you desire.

Let's say you'll be selling the business to an unrelated third party. The financial impact will be significantly different than "gifting" the business during your lifetime or transitioning ownership upon your death by way of anestate plan. You must determine the value needed from the sale to maintain your lifestyle once you no longer own the business — and that's just the start.

Related:Most Family Businesses Don't Have a Succession Plan in Place, But That's a Huge Mistake

2. Making sense of a sale prior to the sale

Selling to an unrelated third party can present several challenges. Identifyingpotential buyersthat are qualified to purchase the business isn't always easy nor is taking all the appropriate steps to prepare the business for a sale. A great deal of information will be required as part of the buyer's due diligence process. How long will the process take from start to finish?

Then, there's the question of whether to engage a business broker or investment banker to assist in the sale. How will they evaluate potential offers? What potential issues might come up in the purchase agreement? Are there any confidentiality concerns? Is the sales process being done in the most tax-efficient manner? Have you considered what you'll do after the sale?

3. Balancing business continuity and succession planning

We recently worked with an owner who had several separate yet related businesses. They only wanted to sell one of them. The process started with a full valuation and then the determination of whether selling one business would be detrimental to the value of the combined businesses. They also wanted to explore whether they could sell the business to a group of employees and how that might compare to an outright sale.

Weconducted an assessmentto identify the business owner's goals in the ownership transition. Then, we helped them prioritize those goals. After talking with several interested buyers, including the employees, the owner decided to move forward with a large buyer who expressed interest in acquiring the business and real estate.

4. Arriving at a smart fiscal decision

业主选择的买家下来的事实that it would enable them to achieve the majority of their highest-priority goals. Because of advanced planning, the owner knewwhat their business was worth, the minimum value they'd need to receive from the sale and the potential issues the buyer would likely raise.

最终,买方出价是lower than the valuation, but we were able to negotiate a more acceptable offer that provided for full payment at closing. This provided the certainty that the owner sought, and the transaction was closed within a reasonable amount of time. All parties were pleased with the outcome.

First Business Bank recommends youemploy a team of professionalsto help you come up with a proper valuation for your business — including "your CPA and business appraiser. You might also include your attorney, wealth management professional, business banker and possibly an investment banker/business broker in the discussion to ensure coordination."

5. Putting the pieces together

Creating a succession plan for your business always starts with defining the goals you'd like to accomplish as part of the ownership transition. It's for this reason, among many others, that we recommend getting the ball rolling as early as possible. Once you've defined your goals, you can focus on arriving at a fair market value for your business today.

With that in mind, how much value would you need to realize to be financially independent after the transition? Will the sale allow you to live your desired lifestyle? If there's a gap between the fair market value and what you need to achieve your future income needs, then develop a plan toincrease the valueof your business within the timeframe you'd like for the transition.

Related:4 Lessons on Succession Planning for Entrepreneurs

Getting what it's worth

We firmly believe that the more time and effort you spend on business succession planning can exponentially improve the probability of a satisfactory outcome. The more you prepare and understand what to expect, the smoother the process will go for both you and the buyer. It also doesn't hurt to have an advisor on hand who can properly assist you through the process.

Ultimately, preparation is key to successful succession planning for business owners. It will save you time and could even help in building trust with the buyer, which can minimize conflict as the process moves forward. When the buyer has confidence in the information they're receiving and your integrity, it provides you with more leverage in negotiating the final price and terms.

最后,一个往下cession planning roadmap increases the chances that you'll get what the business is worth and be able to maintain your lifestyle for years to come. It's all in your approach.