The Successful Succession
If you fail to plan, you plan to fail. That’s why it’s never too early to start protecting your business, your family, and your employees.
What is the difference between a dream and a goal?
While many shop owners dream about selling their shop and retiring, for most, a dream is all it is. Why? A dream is an insubstantial idea. A goal is written down and has dates.
What is a succession plan, and why do I need one?
Many shop owners ask these questions, especially if retirement is a few years off. Let me begin with this statement: Everyone needs a succession plan from the first day in business until the plan is executed.
What is a succession plan?
We will start with the premise that all businesses are sold at some point. Businesses that don’t have a plan are often sold at auction, or just close and disappear. Succession planning is the orderly, planned transfer of ownership from one person or entity to another. Shop owners need two plans.
One plan is the Best-Case Scenario Plan where you ride off into the sunset to your next phase in life, and the other is the What-If Plan. What if you get hit by a bus tomorrow? What happens to the business, your employees, and your family?
Before we look at the two plans, let’s look at your business and see if you have things in order for either plan. Are your financials in order? You need to have clean, current financials at all times. This is important to operate the business and especially important to sell the business.
Your business should look its best at all times. Before you sell a car, chances are, you would have it detailed. When was the last time you detailed your shop? How clean is too clean? Your shop should look its very best at all times. What if a potential buyer walked in the door today? What would they think? This has other obvious benefits for your employees and customers. Do you have adequate financial reserves? Do you have the cash available in a savings account for all the possible needs?
What are your insurance deductibles? That money should be in the bank. What are your monthly expenses? Do you have a minimum of two months in the bank? I would recommend four to six months reserves. Do you have adequate insurance?
Look at all your insurance needs: garage liability, personal liability, building insurance, disability insurance and especially life insurance. Once all of these details have been taken care of, you will be able to complete your succession plans.
Check back with us next week to learn about the two types of succession planning. Want to learn more about business planning in general? Enroll now in Guerrilla Shop Management – the next round begins February 28th. Call us today at 800-755-0988 to enroll!