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Business Succession Planning Or Business Extinction Pending?

What’s Next? Succession vs. Extinction

The holidays are over, and as everyone gets back to work (if you were lucky enough to get a break in the first place) it always starts me thinking about two things. First, I realise how much I miss the summer vacations from my school days. And as a father of three, don’t think I haven’t told my kids how lucky they are and how much they should appreciate the time off while they still get it. “Back in my day”…

The second thing that I begin to think about is retirement. Retirement means different things to different people, from sitting on a beach somewhere, drink in hand to sitting in the middle of the bay in a boat drowning worms to pursuing any number of passions outside their business pursuits. For me, thoughts of retirement definitely involve more travel, more leisure time and the ability to work on projects that have nothing to do with the world of business and finance. But one factor that all business owners with aspirations of retirement share in common (whether they know it or not) is the absolute need for a succession plan. I have read research from the US that suggests that up to 70% of owner-managed businesses are either liquidated or sold after the retirement of their founders. A common cause of this phenomenon is the owners’ failure to implement and execute an effective ownership and management succession plan. So if you’re dreaming of playing 18 holes of golf a day for the rest of your days and you haven’t got a succession plan for your business, here are a few things you need to know to get started, whether you’re planning to retire in two years or ten.

First of all, you have to weigh up your options. Many of today’s business owners are “baby boomers” that will all be looking forward to life after the 9 to 5 in the next five to fifteen years. But recent studies of owner-managed businesses reveal that up to 77% of business owners have not created a succession plan. Depending on the option you choose, you will have varying time frames within which to act decisively to make sure you can effectively create and execute a succession plan. And as things change with your business, the economy, your industry and your life, you will want to get started as soon as possible to make sure you have a plan in place that will be flexible an adaptable enough to survive until you’re comfortably lounging on a tropical island somewhere.

I’m going to look at three common exit strategies and some key issues to address with each one of them to make sure you will be able to effectively execute the one that suits your situation best. This isn’t written as an extensive or exhaustive list of options or a definitive “how to” of succession planning. It is written to get you thinking about the importance of succession planning to your business. Often, the difference between foresight with regard to this issue and just flying by the seat of your pants comes down to a matter of the succession or the extinction of your business. What you will want to keep in mind while reading this article is that, whatever strategy you choose, creating a succession plan boils down to doing whatever needs to be done to ensure that both you and your business are going to be successful and sustainable well beyond your planned exit date.

Third-party Sale

This is the most common “plan” amongst business owners, but typically, it isn’t really a succession plan. Business owners tell themselves that they will simply sell the business when they’re ready to retire and that will be the end of it. The first mistake with this assumption is the “simply” part. Selling a business takes careful planning and a clear marketing strategy and, in some cases, can take 5-10 years to execute properly. By properly, I mean selling up without selling yourself short.

Most business owners don’t realise the fact that their business is worth exactly what someone is willing to pay them for it – today. Many owners think that the value of their business is equal to the amount of assets the business owns, the equity in the business, the goodwill and the money that they have invested into the business since they started or bought the company. These factors, while not irrelevant, cannot be relied upon as an accurate indicator of the value of your business. The real value of your business is what you can sell it for at the time you’re looking to offload it. People who are looking to buy businesses are typically looking to make a good investment. But most owner-managed businesses are not run solely on the basis of what generates the best return on investment. There are lifestyle considerations, taxation considerations and various structures in place (such as trusts) that might serve the purpose of the family owners of the business more than they serve the needs of someone looking to buy a business. Typically, a minimum of 1-2 years would be required to fundamentally change the financial reporting focus, corporate structure, and future growth plans of any business prior to a successful sale. Often, these considerations and the changes required to make a business saleable will be more extensive in nature and take considerably longer than the minimum, depending on the current state of the business.

If this is the path you are considering, the message is clear, get started sooner rather than later. My final suggestion with regard to third party sales as an exit strategy would be to seek external professional advice. You will ultimately save yourself considerable headaches and make ensure that you maximise your selling price to the greatest extent possible by engaging a qualified, experienced succession planner to help you create and execute your plan of attack.

Generation Next

Congratulations, son! You’re the next CEO of Smith & Sons. The next most common succession planning strategy is to hand the keys over to a trusted member of the family when you’re ready to retire. As is the case with any succession plan, the key element is that you have to actually have a plan and effectively execute it to get the desired results. Simply telling yourself that Junior is going to one day take the reins so you can begin your around-the-world trip by cruise ship is not sufficient to make it happen. The single most important aspect of a succession plan that involves transfer of the business to the next generation is the early involvement of the “chosen one(s)” in a senior management capacity. By early involvement, I mean to say that you need to get the successor(s) on board before you retire – preferably two to five years before you retire. This will give you, them and the employees and stakeholders of the business confidence in their ability to steer the ship once you have left the captaincy. It will also give you time to change directions should your children all decide one day that they’re not interested in carrying on the banner of the family business. Or if it becomes apparent that the kids lack the required enthusiasm or expertise to rise to the occasion, you’ll need time to come up with an alternative exit.

A second key consideration with this approach is to make sure that the business is operating profitably enough to provide adequate financial support for the retiring owners and the new caretakers without putting a strain on cash flow or the overall sustainability of the organisation. Otherwise, both the recent retiree and the new CEO will be out looking for a new job before the former has the chance to make a dent in his golf handicap. Again, careful consideration of all the variables must be undertaken. If the retired owners are going to be reliant on a lump sum payment or ongoing dividends from the business to maintain their chosen lifestyle, the business impacts will have to be projected to see whether or not that reliance jeopardises the ability of the business to continue operating into the future.

Management Buyout

This approach to succession planning is less common because few business owners understand how the process works or how to execute a management buyout plan. And while management buyouts can be structured quite simply, the devil is in the details. Getting the step-by-step process in place and executing it effectively are crucial to the success of this strategy.

Most importantly (and obviously), it is key to choose exactly who will be the future owner(s) of the business and get them actively involved in the process as early as possible. As is the case with the family succession plan, it makes no sense to “spring” your idea on someone just before you plan to call it quits. To do so will most often result in costly delays and complications at best and epic failure at worst. Clearly identifying who will be taking over what role(s) and what ownership structure will commence after the retirement of the current owners as early in the process as possible is always best.

The next critical step is to put a manageable, step-by-step process in place to make the transition possible. Goals and milestones involved in the process should be laid out clearly and deadlines for key elements of the plan should be agreed to and established in writing. Everyone involved in the business, from the current owners, to the future owners and all of the key stakeholders of the business should be able to see a clear strategic pathway from the beginning of the implementation of the plan to the day of handover.

As can be the case with any exit strategy, competing interests of several different parties need to be taken into consideration with management buyouts in particular. Oftentimes owner-managed businesses come with a lot of “baggage” that comes from the personal investment of time and energy into building something more than the sum of the assets and liabilities might suggest. Any stakeholders without that personal investment of self will see things differently to the founders of the company. It will take cooperation and understanding to stick to a clearly defined management buyout plan.

If you’d like to get more details about succession planning or any other aspect of business strategy, contact Alan via his website with any of your questions. And, while you’re there, be sure to sign up to get his free eBook, “7 Reasons the Bank Won’t Back Your Business”.

What Are the Things You Look For in an Internet Business Opportunity?

Modernization motivated us to be successful financially. Thus, there are many of us who are forced to look for opportunities for us to earn huge income to help us in our needs.

Since a lot of professions can hardly make millionaires out of ordinary people, a lot of people resort to business. However, a lot of forms of traditional business require huge amounts of cash as financial investment; thus only those who can afford can make the most in any business endeavor.

However, with the advancement of Internet technology, a lot of home based Internet business opportunities which are not as costly as those of traditional means of business proliferate. Online success is not measured by the quantity of your investment but by its quality. The very reason why successful businessmen thrive online is the efficiency of online tools and marketing systems they make use of. Read on and discover what you have to learn about an Internet business opportunity.

- Think About The Culture Online

Many people haven’t known about the lucrative virtual market on the net. Those who know a bit think that to give out enough cash is also significant. This is hardly true. The primary requirement in conducting business online is quality knowledge about what tools to use and how to use them, lead generation and how to amass massive traffic for your sites.

The major reason why many online entrepreneurs don’t succeed or last online is that they lack the knowledge. That’s the major reason why I always encourage people to invest primarily in education! This sounds difficult to people who have no idea of what education to pursue, but fortunately there are e-courses about lead generation strategies, marketing strategies, and traffic generation techniques, etc…

Marketing systems are available online but they can’t all guarantee online success. If you are raring to learn more about the online business, you have to select the best marketing system that takes care of all your business needs and at the same time offers you a strong coaching program for business.

- Select A Legit Business Opportunity

Fraudulent systems are not uncommon anywhere even online. A lot of these systems are marketed through ad campaigns which have adulterated facts which many people have believed. When these weak systems are used, the people who bought them realize that it’s such a waste of money since their business still lags than those who did the right choice.

For you not to get in the trap of any illegitimate online business, give time to evaluate different online business opportunities. A business opportunity is considered legitimate if it offers high quality products or services. Not only does it promote itself through products but also provides customers with free support facilities by which customers can air their concerns. Furthermore, a legitimate business opportunity is a member of associations such as Better Business Bureau, iCop and also Honest eOnline.

- Find A Business Opportunity With A Strong Support System

As said earlier, many systems on the net are marketed through the use of dishonest ad campaigns which can only add troubles to businessmen instead of addressing all concerns. If you are stuck with a home based business opportunity that does not fulfill its promises, you can be sure of failure.

A business opportunity that has strong support system enables you to find greater opportunities, many more clients and even more influential business partners. In other words, this strong support system serves as the backbone of the business in which you can work to the top. In this manner, you can be more competitive as your products consistently earn higher market value.

- Make Use Of Business System That Brings Profits As Soon As Possible

Outside the online world, the business opportunities that you can take do take several years before you can ever achieve the return of your investments. Oftentimes businesses go bankrupt even before they get a portion of returns for their investment.

Nevertheless, online, it won’t take you forever to get rich for as long as you do the right things. This is one great advantage you can get when you venture in an online business and it’s one thing that most people miss out when they don’t invest time and effort and a small amount of cash to learn the ropes online. It goes to show that making it well online is dependent on how knowledgeable you are about online techniques, marketing techniques and even the software to be used here…

All the great financial benefits you can get from an Internet home based business opportunity are truly enticing.

However, the concern of most newbies is: what business opportunity is worthwhile….?

If you spend ample time to evaluate Internet business opportunities you come across with by following these guidelines, you can truly pick the best choice. For the whole lot of people from 160 countries, the greatest choice would be Carbon Copy Pro. No pun intended however CCPro has all the qualities mentioned above. It’s that marketing system that gives you a legitimate business opportunity with the strong support system and of course generates profits at the shortest time. Spend time to research about marketing systems but you will surely find CCPro to be a leading marketing system online. You can learn more from a case study of this great Internet home based business opportunity here.