Wednesday, June 15, 2016

SBDC offers Succession Planning for Small Business Owners

By: Certified Business Advisors Jim Fletcher, Wenatchee SBDC and Linda Johnson, Yakima SBDC

Every year hundreds of businesses owners try to make a successful exit by selling their business. Of all who try, 20% are in the best position to find qualified buyers and receive a full offer, 30% fail completely and sell for a liquidation value, if anything.  That means 50% of all who try could do better.

Do you have a plan to sell your business?
Our goal is to help that 50% get a better outcome.  

Planning to sell includes a review of existing financials, preparing a business value assessment and identifying business improvements and actions that can be implemented over the next two to three years to improve the business value when it’s time to sell.

Why are business sales so difficult to finance?

The recession and lack of a meaningful recovery has taken its toll.  There is less buyer’s equity to invest.  In recent years, too many businesses are chasing too few or a limited number of buyers and financial resources. 

In some cases, businesses attempt to keep taxes low and deduct as much as they can, sometimes showing (on paper) a loss to the business each year. A bank is hesitant to finance a loan for a business that shows a loss. In other situations, a business may be made up of intangibles or 'blue sky' that are difficult to determine a value.

If an owner does want to sell the business:
They need to focus their time and energy creating a business that buyers will want. This means working on:
A. Profitability.
B. Competitive edge - to stay profitable.
C. Sustainability - to survive economic downturns.
D. Scalability - so the business grows.
E. Business culture - so good employees stay.
F. Most efforts to transition a business fail because the owner remains an entrepreneur, not a manager.

Business Exit Planning = systematic process.

  • Maximize Business Value.
  • Maximize the number of Possible Transition Models Available.
  • Minimize Cost to the business owner.
The process helps identify:
  • Real transition opportunities
  • Business strengths and weaknesses.
  • Risks to a successful exit or succession.
  • Needs of both the business and the owner, now and for their life after business.
  • New wealth opportunities: keeping businesses successful and local.
Cost: There can be costs for an outside planning-level evaluation. Clients may choose to use their own accountant or recommendations can be provided.  

Advising services of the SBDC are at no fee and confidential.  

For more information contact: 

Jim Fletcher, CBA, ABPA  at 509-888-7252;
Linda Johnson, CBA, ABPA at 509-454-7612;

Or contact your local SBDC office in Moses Lake,  Okanogan, Pullman, Spokane, Tri-Cities, Walla Walla, Wenatchee or Yakima.