Business Succession Takes “Considerable Planning.”Chia-Li Chien
Chia-Li Chien | Sept. 19, 2014
In my experience, I’ve found that privately-held business owners want to have successful business cash-out events, regardless of whom they sell, and still create a win-win situation for both buyer and seller. However, according to economic expert Rob Slee, there are some timing factors that must be aligned (2009):
- Business Timing: Does the business have a solid key management team that can operate with or without the owner or founder?
- Economic Timing: Where are the economic cycle and its related Industry trending in Market M&A (Merger and Acquisition) movement (not performance)? (See details from Slee; 2007.)
- Personal timing of the owner—the readiness for owners to move on to something else more or less challenging.
One of the best business growth predictors involves considerable time and planning, according to the research paper from Manolova, Brush, Edelman & Shaver (2012). This is largely due to the owner’s desire to be in survival mode instead of desire to take his or her business to the next level. The research found that most businesses don’t grow rapidly. Instead, most businesses grow over time in sales, employees, market share, etc.
Imagine someone you know who lives paycheck to paycheck. That person is unlikely able to save any money because of the pressure of day-to-day survival. Because of this, planning for tomorrow is a difficult or even unimaginable concept. This person has a “high tension” focus on simple survival. The survival mode cycle can be very long, depending on one’s circumstances.
Recently, I was referred to Judy, who has a successful multi-million dollar international company. She knew her market share was growing based on her well-built network, connections and several other industry indicators. She also knew that she needed to focus on one core competency to continue building a competitive edge.
However, she fell short in her financials She knew her business was profitable but did not know there was limited cash flow. You see, profits in business are like food and cash is like oxygen. Humans can go without food for up to three days and most likely survive just fine. But humans can’t go ten minutes without oxygen without certain death. When the cash flow is tight, every intention of investing in your business growth gets delayed and further drives you from having a competitive edge.
The longer you stay in this cycle, the less business equity value you have.
The less business equity value you have, the less probability you will be able to do “considerable planning” of any kind.
Perhaps you think you know why you’re in business. But do you really know what you don’t know? Do you know how to eventually realize your desired business outcome?
Good planning starts with knowing where you are today and where you are going in the next three to five years. Every business owner should be constantly adjusting timing every step during the growth of the business. He or she must spend time watching and thinking about economic timing to stay agile and competitive, to innovate, and to meet market needs.
Don’t cut short your business and personal planning time. Even as you grow wiser as you age gracefully, you may still feel reluctant to spend time in planning and implementation. And, you may think you know about business succession planning.
I challenge you to think again.
I would love to hear how you envision life after maximizing your business equity value. And, I would love to help make it a reality for you. You can get an easy-to-follow Considerable Planning Guide for your business succession planning. Schedule an appointment today!
Manolova, T. S., Brush, C. G., Edelman, L. F., & Shaver, K. G. (2012). One size does not fit all: Entrepreneurial expectancies and growth intentions of US women and men nascent entrepreneurs. Entrepreneurship & Regional Development, 24(1/2), 7-27. doi:10.
Brush, C. G. (1992). Research on Women Business Owners: Past Trends, a New Perspective and Future Directions. Entrepreneurship: Theory & Practice, 16(4), 5-30.
Slee, Robert T. 2009. Midas Marketing, how Midas managers make markets. Charlotte, NC: Burn the Boats Press.
Slee, Robert T. 2007. Midas Managers, how every business they touch turns to gold. Charlotte, NC: Burn the Boats Press.