Experience is the Difference®

Picking someone to lead your company after you step down is probably among the hardest aspects of retiring (or otherwise moving on). Sure, there are some business owners who have a ready-made successor waiting in the wings at a moment’s notice. But many have a few viable candidates to consider — others have too few.

When looking for a successor, for best results, keep an open mind. Don’t assume you have to pick any one person — look everywhere. Here are three hot spots to consider.

1. Your family. If yours is a family-owned business, this is a natural place to first look for a successor. Yet, because of the relationships and emotions involved, finding a successor in the family can be particularly complex. Make absolutely sure a son, daughter or other family member really wants to succeed you. But also keep in mind that desire isn’t enough. The loved one must also have the proper qualifications, as well as experience inside and, ideally, outside the company.

2. Nonfamily employees. Keep an eye out for company “stars” who are still early in their careers, regardless of their functional or geographic area. Start developing their leadership skills as early as possible and put them to the test regularly. For example, as time goes on, continually create new projects or positions that give them responsibility for increasingly larger and more complex profit centers to see how they’ll measure up.

3. The wide, wide world. If a family member or current employee just isn’t feasible, you can always look externally. A good way to start is simply by networking with people in your industry, former employees and professional advisors. You can also try placing an ad in a newspaper or trade publication, or on an Internet job site. Don’t forget executive search firms either; they’ll help screen candidates and conduct interviews.

At the end of the day, any successor — whether family member, employee or external candidate — must have the right stuff. Please contact our firm for help setting up an effective succession plan.

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Family business succession planning meeting. Father, son and daughter business people.

It’s easy to fall into the trap of thinking about a succession plan as being about only two people: you and your successor. But a truly graceful passing of the baton to the next leader hinges on total staff buy-in — or, at least, acceptance. Getting managers and key employees involved in the planning can help you garner that buy-in and, ultimately, ensure a successful transition.

Remember: Misinformation, rumors, threats about quitting or refusals to support the new boss are often inevitable in a succession. To help keep potential sources of conflict in check, identify stakeholders who may have strong concerns about the next leader or the succession planning process itself. Then work out problems with them early on. You may want to start with the easiest of the bunch and work your way up to the individual who appears most dead-set in his or her opposition.

In reality, a succession plan isn’t just a plan — it’s actions as well. Please contact us for help devising the best approach and executing it every step of the way.

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Selling your businessMost entrepreneurs eventually think about selling their businesses, whether as a prelude to retirement or to pursue other activities. In doing so, they often underestimate the effort required for a satisfactory outcome and overestimate the value and salability of their enterprises. If you're contemplating selling, here are some common mistakes to avoid.

1. Overestimating the value of your business.

Your price should be based on the fair market value of the business in its current form. Buyers won't care about the work you've put into building your business or your unique vision for its future.

2. Failing to account for the nature and make-up of your business.

The values of most businesses proceed from a mixture of variables. If your business includes significant equipment, real estate, intellectual property, or other such assets, their values should be separately established before being factored into the overall price. If you're selling a service or professional firm, much of its value may depend on the experience and skills of your managers and employees. In such a case, the price may vary according to the expected retention of key individuals.

3. Failing to base your sale price upon independent appraisals.

Even if you think you know the value of your business, you should obtain two or more outside appraisals from professionals familiar with your industry. If the appraisals conflict with your opinion, they'll provide a much-needed reality check. If they confirm your opinion, they'll become a useful sales tool.

4. Not hiring a professional business broker to handle the sale.

Owners are often too personally invested (and/or eager to sell) to effectively negotiate sales of their businesses. A broker familiar with your type of business will know what issues are important to buyers and what characteristics to emphasize or de-emphasize, without becoming emotionally involved.

5. Neglecting to work with the buyer to ensure a smooth transition.

Nobody likes being thrust into unfamiliar circumstances without preparation. Notifying your managers, employees, and customers in advance and doing all you can to allay their concerns will serve your own best interests, as well as being the honorable thing to do. Discontent on the part of any of the affected parties could result in conflicts, reduced revenue for the buyer, withheld sale payments, and litigation.

6. Being unwilling to help finance the sale.

If you're unwilling to take back a note, your sale price is limited to the buyer's cash and ability to obtain outside financing. At best this could limit the number of potential buyers, and at worst it could limit your sale proceeds. (Conversely, if you finance too much of the sale price, you'll increase the risk of default.)

Selling your business is too important to attempt without professional help. If you're considering selling, call us at 302.225.5000 or email info@gunnip.com for an appointment to help formulate your plan.

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Experience is the Difference®

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