By CRISTINA JANNEY
Hays Post
If you think you want to leave your business anytime soon, you need to start now, according to an economic specialist.
Michael Aumack, economic specialist and public information officer with the U.S. Small Business Administration Wichita District, spoke at a Chamber in Hays luncheon on Friday.
He said it might take years for a business owner to develop a succession plan.
Aumack echoed in his talk on Friday the importance of succession planning during a time when many business owners are aging and looking toward retirement.
"Succession, think of it as keeping your success rolling," Aumack said.
"Your entity, your business, is always growing, and the world is always changing," he said. ... "You need to look at your business as nothing remains the same.
"Everything is dynamic. It is a way to look at all of the critical things: your key employees, your markets, key roles in your business and your role in your business. What happens if one of those things changes?"
He said business owners need to have plans to keep their businesses rolling through market fluctuations or unforeseen incidents.
The other aspect of succession is plans to leave a business, hopefully, voluntarily.
"It's never too early to start, and it sometimes takes years to get things lined up, so your business is at its greatest valuation," Aumack said.
"And you as a business owner can walk away and say, 'This baby is going to hum, and keep growing without me like a turn-key business," he said. "The closer you get it to turn-key, the more valuable it is.
"If you are the magic that keeps it going, and the magic walks out the door, so does the business."
Reasons owners are forced to quit:
• Distress-financial or personal
• Disability-physical or mental impairment
• Divorce-full of consequences for all parties
• Dynamics-changing markets, models and technology
• Disputes-between partners
• Death-of principal owner
Aumack said there are trade-offs and rarely win-wins.
"It's you getting a really good idea of just how valuable the business is and how much someone is willing to pay for it," he said.
Aumack provided worksheets available through the Small Business Administration that business owners can use to calculate an approximate value for their businesses.
He said it's essential for business owners to separate themselves from their businesses, both on paper and in terms of labor.
He said business owners need to consider if they want to leave their businesses intact for their neighbors, and then what they need financially to carry on after they leave those businesses.
There are three ways to exit a business:
Liquidate-No planning needed, yields the least value
Sell-Understanding how the business will be valued at exit is essential to this plan.
Continue as an absentee owner-Seller financed-exit in stages
Aumack said you need to look at your employees and identify the key employees who drive results.
"How can I incentivize them to keep doing what they're doing and keep them happy and productive?" he said.
Business owners might need to reconsider their debt structure. Service-based business owners might consider purchasing instead of leasing their buildings. This will allow them to build equity in real property.
You could also acquire a smaller competitor or initiate a merger.
Documenting procedures will also help you show value to potential buyers.
He also recommended developing an advisory team. This could include your banker, accountant, CPA or a close friend who can advise you.
You can access more resources through the Small Business Administration at www.sba.gov/ks.