Starting a business from scratch is a journey filled with challenges, excitement, and, sometimes, unexpected realizations. As you hustle to secure your first client, define your services, set prices, and carve out your niche in the market, you may find yourself glancing at established competitors who seem to effortlessly coast along, having long ago figured out the ins and outs of their industry.
What strikes me as truly remarkable, now that I focus on advising business owners on financial matters and succession planning, is how many entrepreneurs are willing to let their decades of hard work dissolve into obscurity once they're gone.
Regardless of how far you've come with your business, chances are you've achieved more than someone else and someone else is striving to reach the point where you currently stand. They might even be willing to invest to bridge that gap.
While I understand that every entrepreneur has their own vision for exiting their business, it seems natural that most would feel a sense of attachment to the brand they've built, the employees they've nurtured, the community they serve, and the clients they've supported. Even if you're no longer directly involved in the day-to-day operations, seeing your legacy continue to thrive would likely bring a sense of fulfillment.
In my view, there's a moral obligation for entrepreneurs to plan for the succession of their businesses to the best of their ability. Yet, research shows that only around one-third of family businesses have a well-documented and communicated succession plan. (PwC’s US Family Business Survey, 2023).
A crucial first step in this process is obtaining a business valuation. Knowing the true worth of your business empowers you to make informed decisions about your future. For instance, if your business is valued at $5 million, you can assess whether selling it would fund your retirement, whatever retirement may mean for you and your family. Additionally, understanding how much of your net worth is tied to your business highlights the importance of diversifying your investments, particularly if your industry is undergoing significant changes or technological advancements.
Furthermore, a business valuation sheds light on what matters most to potential investors, guiding you on areas to focus on to enhance your business's value over time. While these are practical reasons to pursue a valuation, there are also estate planning considerations such as equalization and tax planning, which warrant separate discussions.
In conclusion, I urge entrepreneurs to carefully contemplate the future of their businesses beyond their own tenure. There's likely a new generation of ambitious individuals in your industry eager to take your business to greater heights given the opportunity. Failing to devise a proper exit strategy represents a missed opportunity not only for yourself but for the legacy you've worked so hard to build.
A logical starting point is obtaining a business valuation to gain clarity and explore the various avenues for exiting your business.
For those interested in obtaining a preliminary estimate of their business's value, click to Get Started. We offer business valuations and certified appraisals as a paid service. For more information, visit www.BostonIntegrity.com or click to Schedule a Meeting.
I’ve been in financial services since 2014 and I continue learning and posting about these topics regularly. My views and opinions will evolve over time. Schedule a meeting with myself or your current financial planner if you are looking for personalized advice based on your current situation.
Sources:
- “PWC’s 2023 US Family Business Survey.” PwC, www.pwc.com/us/en/services/trust-solutions/private-company-services/library/family-business-survey.html. Accessed 6 May 2024.