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Successful Succession Planning

Successful succession planning

No time like the present to start preparing for the future

By Kevyn Burger

Thinking about selling your business in the next few years?

Maybe it would be worth making a resolution to start laying the groundwork for the transition in the new year.

In the long run, planning could save you a lot of money — and a lot of grief, says Julie Keyes, a Certified Exit Planning Advisor.

“A lot of owners don’t have the equity they think they have. They need time to enhance their businesses,” Keyes said. “They have one shot to get this right, and how they will live for the rest of their lives depends on it. But I’ve seen people spend more time planning a vacation than they spend planning their exit.”

Keyes is one of four Minnesota advisers who have been credentialed by the Exit Planning Institute in Cleveland, Ohio.

“It’s a relatively new credential, and professionals come to it from several different disciplines. At least half are CPA’s, the rest are financial planners, attorneys and M&A advisers,” said Keyes. “And there are a small number of people like me.”

Keyes, who operates Coon Rapids-based KeyeStrategies, is a business coach. A former business owner herself, her clients have done the hard work of building a company.

“I have a special attachment to those people who have blazed a trail, the ones who took a chance and made the investment,” Keyes said.

But she’s worried about baby boomer business owners who will ultimately sell and retire.

A staggering amount of wealth will be transferred in the next generation. The Exit Planning Institute’s research finds that boomers own 63% of the private businesses in the U.S. The Institute’s business owner survey finds that 75% of those owners plan to transition over the next 8 years, representing a transfer of 4.5 million businesses.

“One of the saddest things to come out of survey is that a high percentage of those who’ve already sold said they profoundly regretted it. They either didn’t get the price they wanted, or had to sell with concessions. Or they they didn’t have a life plan worked out for after the sale,” Keyes said.

She outlines a three step process leading up to a sale:

  1. The first step is discovery, working to enhance the business so owners can exit on their own terms. This phase can involve risk mitigation, getting corporate documentation up-to-date and evaluating liability, disability and key man insurance.
  2. Phase two is analysis. “That’s when owners put out the fires and do the internal and external examinations. They want to get professional advice to look at tax options so they can maximize keeping their equity,” Keyes said.
  3. The final step is defining their next chapter. “They review their options and plug into advisers to find out exactly what they will need in retirement. They have to figure that out well in advance of picking up a check at the closing table.”

Keyes finds it ironic that the same qualities that business owners have relied upon to build their businesses can come back to haunt them as they plan their exit.

“I love entrepreneurs, but they do like to do things on the cheap and some won’t invest in enhancing the business to get this transition done right,” she said. “Entrepreneurs by nature are overly optimistic — they’ve had to be. But that doesn’t always serve them; it can lead to big miscalculations at the end.”

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Julie Keyes
Julie Keyes

Founder & Owner at KeyeStrategies, LLC

Julie is a Certified Exit Planning Adviser and Value Growth Advisor with 30+ years of experience. She works with business owners who seek to understand and maximize their exit and critical transition options.