We work with many owners who are looking to transition their business. Some have a specific succession plan in place and others, not so much. There are always concerns with changing business ownership regardless if it is being transitioned to family members or sold.
Owners have a tendency to be hands-on managers, and many remain active in the day to day operations right through and beyond an ownership change. When it comes time to enjoy the fruits of a long career, sometimes it is difficult to let go and to sever the net income a business provides year after year.
Selling your company is an option, however, most owners know that the buyer will not run the business the same way, and there are always concerns about keeping employees or treating the customers the same way they have been treated in the past.
Experience has taught me that the financial consideration is the most important in a sale. However, there are other considerations, such as the future of customers, employees and the overall image of the company for years to come. Many times the business is the owner’s legacy.
Financially, a sale of a business will offer the owner the most immediate cash, but when the cash runs out, an owner will need to rely on other investments and retirement funds to maintain their lifestyle. Certain tax advantages owners enjoy will also disappear with a sale. In addition, market trends show more purchasers are paying for Home Energy businesses over a period of time based on performance. (See the April 2013 Fuel Oil News article ‘Cash at Closing”).
Another option to consider is to keep your business, bring in or promote a general manager and continue to oversee the business without having to be there every day. If this is an option you are considering, here are some questions to ask yourself:
1. Do you have management in place? You may have a ‘go to” person when you are not in the office, but would you be totally comfortable having them run your business for an extended period?
2. Are you prepared to give up some of your pay? If you are very involved in the day to day operations, you will need to hire someone to take on your duties or the duties of your new general manager. Other expenses, such as professional fees, may also increase.
3. Are you willing to let go? Can you really let go and have someone else make the day to day decisions? This is perhaps the most important question to ask yourself.
Here are a couple of recommendations to help you through your reorganization:
Consider setting up an advisory group
This is one way to help with restructuring your business. Bringing on advisors from the industry as well as from your community can be extremely helpful. A different prospective from seasoned business professionals is advisable regardless if your company is restructuring or continuing as is. The decisions are still yours, however you will be better informed to make those decisions with additional input.
Setting up controls is essential
It is crucial that if you are managing remotely that you have good reporting in place to assure that the business remains financially healthy. Monthly P&L reviews and daily or weekly operational reports are one way to stay on top of the business without being on-site. Technology has given us some great tools to measure our businesses. If you can’t measure it, you can’t manage it.
Benchmarking programs are also very helpful as well as industry groups who meet with non-competing counter parts to discuss best practices. We also recommend that an operational audit by an industry professional should be performed quarterly or semi-annually. An annual business valuation is also valuable to determine any trends in overall value and performance.
It takes time, energy and money to restructure your business and manage it remotely. If done properly, the investment can pay off for years to come and you can enjoy all those things you said you would do when you retired without having to give up your business.
(can pull photo and contact info from past issues, ie ‘ May 2012, pg 36)