In the beginning, many entrepreneurs focus on starting their business but it is also important to consider that there may be a day when it is in the business’s best interest to change ownership or when you no longer want to run the business. How can you prepare yourself for a change in business ownership?
A Change in Ownership for Growth
In some cases, a change in business ownership may be what is needed to make the business grow. Here are a few ways new business owners can benefit your business:
- Invest capital to finance the business acquisition and business growth.
- Bring expertise, such as competent management.
- Integrate business systems, employees, procedures, or customers that will benefit your business.
- Act as a catalyst rather than a roadblock for business growth.
Starting vs. Growing a Business
When a person is better at starting a business than growing a business, a change in ownership can be liberating for the business. The new business owners will bring new attitudes, expertise, and resources that can take the business to the next level.
As hard as it might be to accept, sometimes it is better to transfer ownership to someone who is a catalyst for business growth. Starting a business requires different skills and knowledge than growing a business. When you let go of your business, you can choose to earn money from the sale of the business, withdraw, or start a new adventure.
The 12 Steps in Succession Planning
When you prepare for a change in ownership, you typically go through four phases. Each phase encompasses three steps. More specifically, you will progress through 12 steps during the change in ownership phase.
Phase 1: Succession Plan Considerations
You start with succession planning considerations phase where you give the change of ownership serious consideration.
1. Personal considerations
2. Financial considerations
3. Overview of the process
Phase 2: Maturing for Succession
Then you enter the maturing for succession stage where you make sure the business is ready for sale.
4. Sales and buying opportunities
5. Maturing for the sale and preparing to buy
6. Sales materials and offer to buy
Phase 3: Executing Succession Plan
Then you enter the executing the succession plan stage where you execute the change in ownership.
8. Term sheet agreement
Phase 4: Post-Succession
Finally, in post succession you announce the change and transfer management.
10. Public announcement
11. Transfer of Management
12. Plans for the future
For the best exit, it is essential to focus on the present by streamlining the business and keeping the business in the right condition that it could be sold tomorrow. If the owner continuously tries to do everything a little bit better every day, the business will be even more valuable in the future.
If you would like guidance on sucession planning, contact us to coordinate your GrowthWheel one-on-one consultation.