According to the Small Business Administration, 90 per cent of American businesses are family-owned and constitute 62 per cent of the workforce. Additionally, small businesses feed about 64 per cent of the country’s gross domestic product. So why only 30 per cent of these companies are successful in the second generation and only 15 per cent reach the third generation?
This is because most small business proprietors do not thoughtfully plan a viable company succession strategy. Even if you don’t have any plans for retirement, succession planning is still necessary if anything happens to you – death, serious illness, or injury. You need to get the best business advice from business advisory services in Perth.
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When small scale business owners start their own business, their initial intention is to earn a salary to support themselves and their families. Most people consider an exit strategy when one of two events occurs: they run out of steam or withdraw. Unfortunately, these two functions usually put the buyer in a very awkward situation – the general fire sale.
I say this because it usually takes years to create a business succession plan that will add value to your business. If I use the analogy of selling a used car that you don’t want anymore, it’s going to be profitable (no pun intended).
If you decide to sell your business or transfer it to a family member, you’ll need to assemble your transition team first and start the process many years before you want to move on. This will give you enough time to gather your team and make the necessary adjustments in your business and personal financial situation to make the transfer successful.