A significant number of business owners find themselves without a robust succession plan. Many feel overwhelmed by the process, distracted by the daily challenges of running a business, or think it’s too early to begin planning their exit strategy. The truth is that all businesses need a plan for the future. Exit planning is key to this process and, drawing on our years of experience with clients in this situation, we’ve developed some tips for three aspects of succession planning to help you better anticipate and shape the future of your business.

Create Your Vision

What do you want for the future of your business? Be honest. How long do you intend to stay on? What are your financial goals after you leave? Do you need to consider your retirement funds, investments, or any other financial aspects of handing over control to a successor? These queries can help you get specific:

• Do you want to keep your business or sell it?
• Do you want the business to remain in the family?
• Are there any concerns or feuds over the selection of a new leader?
• What will happen to the business if it is sold?

You don’t have to be wedded to the goals you set. The idea is simply to begin cultivating a vision of your ideal future so that you can begin shaping your daily operations in service of that vision.

Identify Potential Successors

Who might take over your business if you leave? For family-owned businesses, the answer is often a family member. This is fine, but it’s important to weigh that person’s willingness and ability to run the business when you leave. Now might be the right time to consider mentorship programs, training initiatives, or other strategies to ensure your chosen successor is prepared to step into the role.

Working with an exit advisor can also help you to develop a well-run process for choosing your successor. Typically, an exit advisor serves as a strategic partner, guiding you through every step of the succession planning process, from assessing the business to goal setting and valuation planning. Their goal is to ensure you maximize value and achieve a successful transition. No matter whom you choose for your successor, be sure to evaluate them on skills such as:

• Having the ability to make key decisions
• Team-building and interpersonal skills.
• Self-direction
• A shared vision for your business’s future
• Flexibility and adaptability
• Thoughtfulness and a willingness to innovate
• The ability to be an inspirational leader, not a micromanager

If you intend to sell, consider how to help your business be a more attractive target for investors. Can you think of competitors who might be interested, or others with the skills necessary to operate your company? Begin growing the business with these potential successors in mind.

Make a Contingency Plan

Preparation is a cornerstone of success. So, the third step in any contingency plan is anticipating anything that could go wrong. What will happen if there is a sudden crisis in the market? What if your intended successor loses interest or no longer has the financial wherewithal to take on the business? Much of your contingency plan is about getting the right people on your team—exceptional managers and skilled staff—who can run the business in your absence, and gently help it navigate a crisis. If you’re unsure where to begin, consider working with a succession planner. They can help you consider issues you might not otherwise think about, discuss how various exit plans could affect your finances, and help you set reasonable expectations about your business’s final value when you do decide to exit.

About NuVescor Mergers & Acquisitions

At NuVescor, we align the interests of investors and business owners to enable our clients’ personal and financial goals. For over a decade, we have helped founders and owners of companies in the manufacturing sectors achieve maximum value for their companies. Together, we can provide business valuations, financial analysis, investment guidance, and business transaction advice for middle-market companies with revenues from $5 million to $50 million. Contact us today to speak with one of our experts.

This blog was originally published in October 2020 and newly updated in December 2023.