Business Succession Planning – Part 5
My name is Tom Schumacher. I am a business lawyer for Bakke Norman Law Offices. Our firm has offices in Menomonie and New Richmond from which we serve an eight county area in Northwestern Wisconsin.
This video is the fifth in a series of videos regarding business transition planning. In this segment I am going to talk about the timing of the business transition plan.
One of my personal philosophies is to keep your options open and do not cut off possible options until it is necessary. This philosophy applies to the timing of a business transition.
A number of factors influence the timing of a business transition:
- The personal circumstances of the owner, such as age, health and overall financial security.
- Is there a management team in place that permits the business to continue to operate without the current owner’s participation?
- What is the status of the general economy? In today’s environment, interest rates are at historic lows and there are large amounts of cash reserves in corporations and financial institutions that are available for investment. There have been other times in which interest rates have been at historical highs and cash available for investment has been low.
- What is the status of the industry in which the business operates? Is the industry strong and is there a demand from others in the industry to expand their business? Is it a buyer’s or seller’s market?
A business owner needs to keep in mind that the process of selling a business takes time – several months is not unusual. Even though the owner may make the decision to sell, it may not necessarily coincide with a market of ready buyers.
The sale of a business creates a second full time job for the business owner. The due diligence process and negotiations of the actual deal are a time consuming and emotional.
The key to a successful sale, transition to the next generation or a transfer to key employees is preparation in the key areas of management, sales and marketing, operations, administration and financials.