70% of privately held businesses will be sold in the coming decade. I heard this statistic while listening to a program and it immediately occurred to me that truer words are rarely spoken. That said, most business owners don't see things this clearly, and most certainly don't plan for it.
In fact the majority of business owners have neither a written succession plan nor a documented process to prepare their businesses for eventual sale. Unfortunately then, when life happens and this reality looms, either no one can know the owner's wishes, or it's too late to see them through. Without succession or sale plans most business owners are flying relatively blind.
All that said, I am not in the least bit surprised that business owners are not making solid plans for the future of their businesses. As an advisor to business owners for decades I've long found this phenomenon to be true. The real matter up for discussion is this: now that we all know our businesses might be in trouble, what should be done? My simple answer will always be to manage a business as if you're planning on selling it, starting today and from this day forward.
Here's why this just makes sense.
First off, those business owners who plan as if they're selling their businesses will inevitably run them more carefully. It's just a natural outcome that they'll be more conscientious and responsible than they would have been otherwise. And it goes without saying that a careful approach will enhance performance.
Secondly, in all likelihood the business will in fact be put up for sale in the next ten years. Business owners who plan accordingly from the outset will always be ready for what lies ahead. They can take time to study the market that the business is operating in and learn how to make the best use of their resources to seize opportunities. This also means adopting best practices in every aspect of business, including both technology and cybersecurity.
From the very beginning, we'd recommend performing an acquisition due diligence review on your business. Along the way and as part of the process you'll discover--and can then progressively address--any concerns that a hypothetical buyer would have, should you put the business up for sale.
If you find yourself well into your first decade of business ownership and still without a succession plan, don't worry. It's never too late to adjust course and begin to manage your business as if it was going to be put up for sale tomorrow. One thing we can guarantee is that you'll thank your future self, because in all likelihood, a sale is already somewhere in the cards.
Measured Business Advice from a Seasoned Legal Team
Here at Calkins Law Firm we've been at this long enough to know that life has a way of throwing some mean curves. While you can't always see what's coming and you certainly can't pretend to know the future, the best way to plan for either is to have a solid plan for your business. That way you, your life's work, and the folks around you aren't left high and dry should circumstances change drastically.
If you're in need of practical business advice with a legal bent, get in touch to learn more and get to know our top-notch team. We're always ready to help a fellow entrepreneur.