07 Jul GUEST BLOG: Succession Planning | Exit Planning for a Trade and Construction Business
As a Trade Business Owner understanding the difference between succession planning and exit planning and implementing changes can lead to a potentially rewarding and passive investment.
Succession planning or exit planning often get put together. However, there is a distinct difference between the two. It is important as a trade and construction business owner that you understand what this difference is and how you can implement plans now to secure your future.
Succession planning is identifying, training, and transferring the leadership/management of a company to another person or team of people.
Exit planning, on the other hand, is the potential sale or when an owner departs a company and passes on ownership to another person, team, or entity.
Succession planning is generally always a part of exit planning. However, done correctly, exit planning does not have to end as most owners think with the sale of their business. This article will explore this further.
The most important and first consideration of succession planning is building your business in a way where it runs itself. Or does not require you there to assure that it generates the level of income and profit you want. Trade business owners especially need to be able to “let go,” pass on their knowledge and introduce clients to the new owners. Many trade businesses, though, tend to be heavily reliant on the owner for this work, but that does not have to be the case.
The term “succession planning” is putting processes in place, implementing management and financial software, and most importantly, finding that person or people that will take on the day-to-day role you play in running your business so that you can retire or take a new direction. As part of your succession plan, you may decide to start an Advisory Board for your business and still have some involvement but not be at the helm.
Selling the business is not the only option.
If you have fulfilled your succession plan and have the business set up so it does or can run without you, it can be treated as another investment in your portfolio – just like your superannuation, property portfolio, or other passive investments. Your business’ income will generate the money needed for your lifestyle or retirement.
This approach is not for everyone; however, this article aims to help you explore options. But if selling your business is your exit strategy, it will still be more valuable, and you will have more interested parties if there is already someone appointed to manage it.
Start succession planning now regardless of what stage your business is at.
The idea you will find someone that can afford to pay the however many thousand or million you think your business is worth to run your business is more often not the case. Not all businesses that go on the market sell, and the percentage is less for trades businesses. What is your plan B?
Make plans now, so you have options and not when you want to retire or move on.
A buyer will pay you more if your business already has a manager in place to run it. Your business will be worth much less if they need to find a manager, train the manager, and then transfer the management responsibility to them. More than likely, they will be required to stay on and manage as part of the deal. If you do it before you sell, you will get more when you do sell. That is why you need a succession plan.
Trade Advisory Group has first hand experience in setting up and implementing succession and exit plans specifically for trades and construction-related industries. We work with you every step of the way by implementing the correct procedures, implementing or improving management and financial software, identifying and training the right staff or people, and setting up the correct company and personal structure to protect your interests.
If you need help getting started or would like to discuss your options, please email me: [email protected].
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