Recently I was invited to speak to a group of successful business owners about the various aspects of succession planning (what I refer to as the Succession Matrix). The Succession Matrix consists of ten interdependent factors that business owners must successfully address to improve the odds that their business will successfully make the transition to and through the next generation of owners and managers. Addressing these factors is important regardless of whether you plan to sell your business or plan to keep it in the family. Unfortunately, many franchisees and business owners are so busy “working IN their business” that they do not invest the time to “work ON their business” to consider their exit options.
Prior to the workshop beginning, the moderator asked each of the business owners to give me a brief introduction of themselves, their company and to rate their preparedness for succession on a scale from 1 to 10. Not surprisingly, the majority of the group rated themselves highly and believed their succession plans were all but complete. This is natural as many business owners believe succession planning consists of implementing wills, trusts, buy sell agreements and life insurance. After the introductions were finished, we spent the next few hours engaged in interactive discussion about issues such as exit strategy, selecting a successor, how to prepare a successor and other topics of interest to the group.
Towards the end of the workshop, the moderator asked each participant to share with the group something they learned and planned to take home to implement. One gentleman in the group spoke up and acknowledged he had an “ah ha” moment. He commented, “I sold my primary business and thought I was done with succession planning. Today has helped me understand I have basically swapped my business for cash. It is now my responsibility to develop a plan for my family, communicate that plan with my family and determine how we will continue to be good stewards of the after tax proceeds and other business interests I am involved in.”
Many of you have dedicated a significant part of your working life pursuing the American dream through the Burger King brand. Some of you will pursue succession through a family member or key executives and others believe a sale is the best exit strategy option. Selling your business is a viable succession option enabling you to harvest the fruits of your labor and investment. Some of you may be familiar with Mike Simmonds, a successful Burger King franchisee in Omaha, NE for many years, who chose to sell his business a few years ago. I had the privilege of working with Mike and Lin (his wife) to help them evaluate their succession alternatives. After considering several options, Mike and Lin ultimately concluded the best decision for them and their family was to sell the business.
Following the sale of the business, Mike made the following remark: “For those of us who have been BK loyalists for most of our adult lives, a sale of this type is very emotionally challenging for ourselves, our key employees, and our families. There are so many questions and uncertainties when you release the gravity of what has held so much together for so long. Personally, I struggled with the decision and my family and associates would not have successfully embraced my actions were it not for support from highly qualified outside consultants.” As you can see, Mike and Lin wrestled with many questions as the sale of a business is a major undertaking. Aside from the obvious financial questions and legitimacy of the transaction, those of you planning to sell should consider several additional questions such as:
- The business has been a large part of my identity for many years, what will I do after I sell my business
- How will I invest my time, talents and treasure?
- How much of the after tax proceeds should be invested to protect my financial security? After all, the business typically provides numerous benefits.
- How much of my liquid net worth do I want to reinvest in other business opportunities?
- How much risk do I want to take at this stage of my career?
- How will my children react to a sale of the business?
- How will my key managers’ and employees’ livelihoods be impacted?
While the sale of your business is a viable succession option, it does not remove the need to continue planning. It simply presents new opportunities and challenges. The next chapter in your life is about to begin. To quote Mike Simmonds again, “I realized there is big time life after BK”. Following the sale of your company, you will undoubtedly be approached by family members or people in the community to invest some of your liquid assets in a new business venture or perhaps you will get the itch to start a new business yourself. Developing reasonable answers to the above questions will hopefully help you determine how you will respond to future invitations/requests and ultimately do what is best for you and your family.
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