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Planning a Business Succession / Transition?

Here's what you need to get right.
On Planning a Business Succession/Transition - Things to Get Right
April 29, 2019 at 12:00 AM
by Dunnington Consulting

Business owners are all facing an inevitable exit, planned or not – and with it, typically the largest financial and personal change of their lives. Virtually everyone hopes to leave their business in good shape, at the top of its / their game and transition with enough money, pride and peace of mind for a secure, sustainable future. It’s the anticipated reward for all the work, risks, sacrifices, pressures and worries of entrepreneurship. But it’s not a slam dunk.

There are many good reasons for private business owners to be thinking ahead about how to sell, transition or monetize their business: 

- To get transition ready before circumstances – health problems, new competition, economic downturns, etc - force an untimely sale 

- To make business improvements to increase value – transition-ready businesses are worth more – and enhance opportunistic actions (good luck is when preparation meets opportunity)

- To become more attractive to potential buyers generally, or selected ones for strategic reasons, in which the multiples and motives may change the game 

- Because it’s time to put a plan in place – there are tens of millions of small business owners in their 50s, 60s, and 70s - and it takes time to do it.

But the prospect of planning for business succession can conjure up a potent mix of hopes, dilemmas and trepidations. One big issue is timing. You have to pay attention to outside trends – industry expansion, contraction, consolidation, interest rates and the business cycle. Looking through your crystal ball, if you had an offer now, would you be inclined to stay the course, or take it now to avoid losing it all later? How would you decide?

That depends on three things – that are rather more under your control:

Note: has three free, online, secure assessment surveys which correspond to these factors – to help you take stock/assess. 


Many owners would exit now if they thought they could swing it financially. But virtually everyone overestimates the value of their business – it’s a rather normal, human assumption. Many also make assumptions about the ease of finding a buyer, the price they’ll get, how long that will take, what taxes will come due, how much they’ll need, etc. Many forget to factor in expenses they’ve grown accustomed to that won’t be paid in a post-owner world (the boat, the yacht club, the golf club, the car, the beach house, the ski condo, etc.) These can roll up into the hesitation – too often a delusion - that they really don’t need to do anything now. They’ll just do it when they get ready. Most wait too long to get an actionable valuation. After all, this never has the press of today’s business issues. Some owners see the uncertainties, dilemmas, and decisions – and just stay focused on today’s urgencies. When people finally start, and begin to test their assumptions, many owners discover they need to increase their business’ value and wish they had started sooner. A rule of thumb is one year of preparation for every decade of operation. It’s all about making their business attractive to the next owner. And giving oneself the best chance – and the time - to load it for success. 


Transition Realities are Disturbing  

The Exit Planning Institute has discovered some ugly realities in their research:




The bleakest future is for a small business that has few factors to make it attractive to buyers – little, other than the owner’s personal reputation, to differentiate it from its competitors. It depends on the ongoing efforts of its owner to produce revenue. It has a number of employees who are only trained on the job, or who possess few distinctive skills that make them an integrated part of the business. It has no incentives that enroll the best performers in long term relationships. It lacks middle management, or anyone who can run the business indefinitely without the owner around to make decisions. 

If that describes the business you own, it is time to start making changes. The generation that is reaching business-buying age has more choices for earning a living, and many more choices that better fit their values.

The economy is long overdue for a correction and there are signs that it’s coming – stock market volatility, flattening yield curve, trade disruptions. When that happens, the circumstances for selling a business will tighten. At some point, the demographics will shift to a buyer’s market. It could be a perfect storm.

Meanwhile, as time passes and circumstances unfold, a natural process unfolds: 

Businesses get more complicated, demand more. Owners may feel less enthusiastic than they once were about devoting all their energy to work. It’s normal to begin to want some relief from the responsibility. A friend of mine once described his longing for just simple decisions like “paper or plastic?”

Owners become frayed as they become steadily more challenged by having a bigger, more complex business. This burnout creep diminishes the attractiveness of additional growth.

People may get frustrated because the strategies they used to grow their companies in the early days don’t work as well as things evolve. 

Anxiety rises as owners look around and see unfortunate, unexpected things happening to good people. 

By the time they finally decide to exit their businesses, owners simply may not have the energy to plan for it, prepare or carry out actions to optimize their exit process with optimal price, terms and timing. After expending so much time and effort building their company, planning for the future may seem tedious and difficult, even pointless. But what’s done in the last lap can make a huge difference – be transition-ready when unexpected problems or nifty opportunities arise. The last lap really counts…..transition-ready companies are worth more …. and owners sleep better with the additional time and financial freedom that brings. Having a proven planning roadmap is extremely helpful:

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Finally, most owners benefit from some important education about exit options, as summarized below: 

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What’s your number? Could you swing it financially or not? How ready are you and your organization? How do you know?

Three final suggestions:

  • Use the resources on this site – – to get smart and get started planning and preparing. Talk with other owners you know who have been through this and go to school on their experience. 

  • Once you gain some knowledge and insights, you will discover the right questions to ask. Then get the right help. You will benefit from a cadre of professional advisors, people you trust with various specialties in some mix for your situation: CPA, financial advisor, estate attorney, management value consultant, exit planner, insurance specialist, business broker, investment banker or private equity/M&A firm.

  • Talk with us at Dunnington Consulting. We love talking with owners. Also, please help us learn and understand your needs, expectations and priorities. One way to do that is to take 5 minutes to answer our research survey, online, anonymous and informative at 

Thank you, in advance. 

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