Each year investors across the globe turn their attention to a small, midwestern city in hope that one man, the Oracle of Omaha, will provide a glimpse into the future of financial markets. For years, investors have scoured Warren Buffett’s annual shareholder letter, hoping to glean some of his investing prowess. Lately, many have searched for an indicator of who will eventually take the reins and lead Berkshire Hathaway, the storied company Buffet has led for decades.
While Mr. Buffett, a vibrant 89 years, and his trusted partner, Charles Munger, who recently rang in his 96th year, have assured investors they have prepared the company and their successors, it does raise a question for all business owners – is your company prepared for the next chapter?
While hordes of investors might not be waiting for an answer, your family, employees, customers, and communities most likely are wondering (and talking) about what will happen to your business once you are gone.
Hopefully, you have thought about your succession plan. If you are like most owners, though, the likelihood that you are ready to exit your business is incredibly low. Just take a look at some of the statistics*.
- Two-thirds of owners are not familiar with all exit options
- 78% have no formal transition team; 83% have no written transition plan; 49% have done NO planning at all
- 93% have no formal life-after-business plan
- 40% have no plans in place to cover illness, death or forced exit
- 56% felt they had a good idea of what their business is worth, yet only 18% have
*Source: EPI State of Owner Readiness Survey Results
So, what can you do to ensure your business is ready for that next chapter? Here are some initial steps to consider.
- Write a contingency plan. Planning for the unexpected is vital to the continuity of your business. Just as you have made plans in your personal life (right?), you must also make plans for your business. A contingency plan, at a minimum, should include the following to ensure the continuation of your business in the event you are no longer able to operate your business:
- Who should manage day-to-day operations;
- Stay bonus plan for key employees;
- The transition of the business;
- Key advisors,
- Possible buyers; and
- Your goals for the business.
- Find out what your business is worth. Having a current valuation of your business will help to set expectations in line with recent sales of a comparable business. Moreover, a valuation may help you refocus on opportunities to maximize areas of value within the business.
- Get organized. Your contingency plan and business valuation are a great start, but don’t stop there! Completing personal financial planning, understanding exit options available, and asking your advisors questions about preparing yourself and your company for the next chapter will pay dividends in the years to come…something the Oracle of Omaha would most certainly appreciate.
If you want to discuss your future, or your business’s future, with someone who’s been there before, reach out to your Aldrich Advisor today.
Meet the Author
Senior Business Advisor
Brian Andreosky, CEPA
Brian Andreosky joined Aldrich in 2019 and is dedicated to helping business owners transition their companies. In this role, he provides exit planning services to help clients maximize the value of their businesses one to five years before marketing the business for sale and is a member of the Exit Planning Institute (EPI). Prior to joining…
- Business owners
- CEPA, Certified Exit Planning Advisor