When It’s Time to Retire, Who Does Your Client Want to Run His Business?
I’ve written previously about the importance of talking about succession planning with clients in this newsletter.
However, a recent Wall Street Journal article has shown that it’s worth revisiting this important issue again.
The article (http://tinyurl.com/7jslpke) highlights some of the biggest mistakes business owners make when they’re ready to retire, and how to avoid them.
Most of my clients have spent decades building businesses
right alongside raising families. But for as much thought as
they put into running successful businesses, many didn’t
put any thought into who’s going to run the place after
They haven’t asked themselves how much money they
might need in order to exit the business (retire) or under
what terms they would transfer the business (sell).
If they plan to sell, will the buyer be a relative, an
employee or someone outside the picture? All of these are
important questions to pose when helping with succession
“I Thought Junior Would Take Over”
Many clients fall into a common trap of assuming that one
of their children will step in and carry on the family
business. But let’s face it – sometimes our kids think our
jobs are boring and want no part of them.
On the flip side, what if more than one child wants to take
over the business? The conflict could end up in court.
Your client might be putting off making a decision on
whom to put in charge simply to avoid hurting another
child’s feelings. That scenario can cost the original owner
retirement income and end up tearing the family apart.
Nobody Can Do It Better
The WSJ pointed out several other mistakes, including
creating a business that’s too dependent on an owner.
If your client is the chief executive as well as the one who
makes all marketing, sales and client service decisions,
who is going to handle those roles when he or she retires?
A business too dependent on an owner, or even a small set
of major customers, can stymie a company’s sale price.
Is It Really Worth That Much?
Another common mistake clients make is overvaluing the
worth of their businesses. If a client thinks her contracting
business is worth $3 million simply because that’s how
much she figures she’ll need when she retires, that’s not
Encourage her to speak with a mergers-and-acquisitions
advisor to get a realistic appraisal of the company. If the
appraisal amount doesn’t match her retirement needs, she’ll
need to either adjust her plans or come up with another
financial strategy to make up the difference.
Don’t Put It Off, Talk about It Now
I encourage you to talk to clients about what they want to
have happen to their businesses after they’re gone. Show
them what might happen if they don’t start to make some
And finally, when it’s time to sell a client’s business, help
them find a qualified attorney to help with the sale. Too
many businesses have undersold when an owner handled
the transaction without the assistance of expert counsel.
To get more information regarding this or any related topic, please visit our website www.TEPLG.com or call us at 630-871-8778.