Posts tagged with: succession

How to Hire a Mentor Exit Strategist

It’s a big step to consider hiring an exit strategist. When you decide you want an exit strategist on your team, hire someone who will help reduce risks, maximize the value of your business, and prepare you and your business for sale or succession. Here are ten fundamentals to qualifying your ideal exit strategist.

Qualify Your Ideal Exit Strategist

  1. Hire someone who has done what you set out to do (e.g., launch a new product line, bring in $10M new revenue, streamline production to eliminate all late and lost jobs) to maximize the value of your business.
  2. Work with an advisor who has built businesses, has taken leadership, ownership, and accountability to get things done; hired the team and has risked everything themselves.
  3. Work with an advisor who teaches you more than one way to get things done, so you can customize the learning to you, your team and your company as you prepare for a transition/transaction.
  4. Work with a mentor who will sit with you to collaborate, rather than a consultant who keeps himself or herself apart. You need someone so engaged in your company and committed to your goals they are always thinking of better solutions for you, a virtual partner at your side.
  5. Work with an authority, someone who delivers specific ideas and solutions to run your business more effectively not just ‘If you fix this, your valuation will be higher’. Work with an authority who also offers training programs engaging your entire team to increase company valuation.
  6. Work with an advisor who is a peer, who has been in your shoes, and who teaches you at your level. You want a mentor who understands your size business, your industry, your challenges, who recognizes and values both your short-term and long-term objectives.
  7. Decide if you need a specialist in marketing/sales/service/HR/finances to solve a specific problem in one area; or if you want a mentor who will help you assess the entire operation to institute and/or refine business fundamentals to add value and leverage before you get to a transaction.
  8. Decide if you want to give away your core value to an outsider to get a task done; or if you want guidance and direction from a virtual partner who will help you integrate systems and strategies to take your whole company to the next level so you can achieve the financial success you know is possible.
  9. Decide if you want to hire a trainer to get you started in a specific skill set; or if you want to hire a mentor who will stick with you to achieve very specific results, in this case preparing for an exit on your terms, on your timeline.
  10. Do you need information that a one-time consultant will produce? Or do you need the ongoing insight, experience and expertise of an exit authority to turn information into knowledge you can integrate into your business, adding value every day?

Advisor Selection

The advisors you choose to surround you, in preparation and through the transaction process, directly impact the outcome you achieve. Know why each person is on your team, the value they add, and what they deliver. Hire the best you can find, not just the best ‘you can afford’.

Hiring the team you need to cash out on your terms is an investment that offers you a high return while reducing your risk to get there.

Use your exit strategist as a resource working with your advisors, integrating them effectively into your team, as the conductor of your orchestra (advisors) performing your symphony (exit plan).

Your exit strategist is central to ensure the success of you and your team of experts in any sale, scale or succession plan. Use these 10 fundamental qualifications to help you identify your ideal exit strategist.

Succession market is booming, baby

Todd Nelson’s article, Small Business: Succession market is booming, baby, in the Minnesota Star Tribune on March 30, 2014, about Richard Burrock, lead partner for business succession services at Boulsy is more anecdotal proof of the demand for succession planning from baby boomers.

In his article, Nelson quoted Burrock: “The need for an exit strategy is gaining urgency as the baby boomers who own 40 percent of Minnesota’s private companies approach retirement.”

He quoted statistics Burrock shared: “More than half of the privately owned companies in the country face an ownership change in the next 10 years, yet an estimated 75 percent have no transition plan in place, Burrock said. Those who don’t are unprepared for life after retirement, with successor owners unidentified, tax strategies unaddressed and business responsibilities that largely have defined them soon out of their hands.”

These are all issues that take time to address and execute, which you can’t do if you wait until it’s too late.

These are the same distressing statistics we’ve been sharing for years to educate and encourage baby boomer business owners to take action.

Nelson quoted Burrock as saying: “To do nothing is a disaster in the making. It really takes away their flexibility. What I always say to clients is, if we plan it properly, you can have it both ways. You can have a nice soft landing and yet you can accomplish your financial goals at the same time.”

Owners need to hear this statement often.

Richard Burrock is another advisor who honestly telling business owners what they need to hear, not just what they want to hear. I concur with his suggestion “that owners begin planning early, at least five years before retirement.”

Nelson substantiated Burrock’s comments by referencing research by Expert Ritch Sorenson, professor of entrepreneurship and academic director of the Family Business Center at the University of St. Thomas’ Opus College of Business. Sorenson’s succession research “emphasizes the importance of developing a common culture that can sustain and be sustained across generations,”

Sorenson also endorsed the advice to begin business [succession] planning early.

If you have questions about your succession planning readiness, contact us to schedule a free consult.

* emphasis is mine.

HSBC Research Recap: Australians Financially Unprepared for Retirement

This data is too important to ignore. In the article below from his Successionplus newsletter, Craig West recaps critical data from Australia research by HSBC. This 2014 data confirms trends we see in the U.S.

As you read, consider if any of these concerns are issues for you and your business too. The HSBC research confirms what we see in TV ads from Prudential; that business owners are not prepared for the cost of retirement and their life expectancy will exceed their ‘money’ by 10 years. They expect their savings to run out about half way through their retirement!

Australians financially unprepared for retirement – HSBC research

Craig West – CEO at Succession Plus in Australia [www.Successionplus.com.au]

According to HSBC research into retirement trends Australians expect their savings to last just 11 out of 21 years in retirement, even though they plan to reduce their living expenses by 33% Contributing to the 10-year shortfall is inadequate planning, a preference for short-term saving, and an underestimation of the cost requirements in later life.

Australians’ pension emphasis similar to other western markets – but similarity stops there.
The survey shows that, despite the introduction of compulsory superannuation [pension] in 1992, the average Australian currently expects 30% of their retirement income will come from the pension, 20% from their super (personal pension), 14% from cash savings, 11% from property, and 8% from shares and investments.

Australians not adequately preparing finances for retirement
According to the survey, Australians anticipate their savings will run out a little over half way through their retirement with nearly 60% acknowledging they are either inadequately preparing for retirement or not preparing at all.

The survey also reveals 56% of Australians have never saved specifically for retirement outside of super. Of those, 47% believe they are being held back by Australia’s cost of living (which rises to 57% for 35-44 year olds).

Australians underestimate their spending needs in retirement
The survey finds that Australians, on average, feel they will need just 66% of their working life income to continue feeling comfortable in retirement – the lowest of all countries surveyed.

This shows a lack of understanding of the increased costs of healthcare as people age and the common statistic that for business owners post retirement spending on holidays and travel etc. can actually rise due to the SME business owner having more time available.

Australians more focused on short-term savings goals
Australians are also not helping their cause by having a short-termism approach to saving. The value of retirement savings reduces more rapidly than any other form of money because of the combined effect of inflation and rising life expectancy, so it is likely that Australians will need more of a savings buffer than currently anticipated.

Strong correlation between financial planning and saving
The survey also finds that Australians who sought a professional adviser increased their savings by 5 times.  “With life expectancy on the rise, the need to save and plan for retirement is becoming even more critical. Yet as daunting as the current challenges may seem, the earlier you plan the better prepared you will be.

That last statement is the key to how you navigate this road. Early exit planning increases the value of your business as well as how much you walk away with and when you can afford to cash out. To start planning for the sale, scale or succession of your business, contact us. Your initial consultation is free.

Effective Management Succession Planning Starts Here

Mortality is not my favorite subject either. But leaving a legacy in your business is a way to ensure immortality not possible anywhere else. An effective succession plan establishes the ground rules for what will happen when you are no longer around or no longer capable of managing the company’s affairs.

  • To add value and make the business buyer attractive, consider appointing objective outsiders as members to your company’s Board of Directors independent of ownership.
  • Establish regular strategic planning meetings that include successors and key employees whom you need to stay fully engaged in the company.
  • Select and regularly communicate with a team of outside advisors, including lawyers, accountants, consultants, wealth advisors and tax advisors who have experience with privately held businesses, complex corporate matters and estate planning. These advisors can be a source of insight, continuity and strength as you prepare the business for succession or during an unexpected crisis.
  • Be very honest with yourself when evaluating the strengths and weaknesses of candidates you consider as possible successors – internal or external. Try to separate issues of family, loyalty, longevity from issues of business acumen and strategic management.
  • Start early to be prepared for the unexpected. Most closely held businesses experience a “sudden loss” of leadership due to death or disability because the owner never planned or prepared for their transition to reinvention; thus leaving behind children or spouses ill prepared to continue to manage the business effectively or sell it most profitably. What would be your plan for the “following Monday morning?” Who would run the company?
  • Invest the time and money to train and educate the “next generation” of leadership for the company- whether the successor is your spouse, children or another family member or outside management hired in. If your succession plan calls for a full or partial sale of your business to some or all of your staff, do the same for the employees who will take over.
Hire a Mentor Exit Strategist

It’s a big step to decide that you will hire an exit strategist. When you decide you want an exit strategist on your team, you want to hire someone who will help maximize the value of your business and prepare your business for sale or succession. Here are ten fundamentals to qualifying your ideal exit strategist.

  1. Hire someone who has done what you set out to do (e.g., launch a new product line, bring in $10M new revenue, streamline production to eliminate all late and lost jobs) to maximize the value of your business.
  2. Work with an advisor who has built businesses, has taken leadership, ownership, and accountability to get things done; hired the team and has risked everything themselves.
  3. Work with an advisor who teaches you more than one way to get things done, so you can customize the learning to you, your team and your company.
  4. Work with a mentor who will sit with you to collaborate, rather than a consultant who keeps himself or herself apart. You need someone so engaged in your company and committed to your goals they are always thinking of better solutions for you.
  5. Work with an authority, someone who gives you ideas one-on-one to run your business more effectively. Work with an authority who also offers training programs you can provide to your entire team to increase company valuation.
  6. Work with an advisor who is a peer, who teaches you at your level. You want a mentor who understands your size business, your industry, your challenges, who recognizes and values your objectives.
  7. Decide if you want an expert in marketing/sales/service/HR/finances to solve a specific problem in one area; or if you want a mentor who will help you oversee the entire operation to institute and/or refine business fundamentals.
  8. Decide if you want to give away your core value to an outsider to get a task done; or if you want guidance and direction from a virtual partner who will help you integrate systems and strategies to take your whole company to the next level so you can achieve the financial success you know is possible.
  9. Decide if you want to hire a trainer to get you started in a specific skill set; or if you want to hire a mentor who will stick with you to achieve very specific results, in this case an exit on your terms, on your timeline.
  10. Do you need information that a one-time consultant will produce? Or do you need the ongoing insight, experience and expertise of an exit authority to turn information into knowledge you can integrate into your business, adding value every day?

Your exit advisor is central to your successful sale, scale or succession plan.These fundamental qualifications are essential.

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