Small Business Succession Plan: Got One?
The IT entrepreneur’s dream goes something like this: Launch, build, expand, enjoy and then exit (i.e., sell) your business at a lofty valuation. But here’s the reality: For most small business CEOs, the required numbers for a successful exit just don’t add up. In fact, most CEOs fail to develop a small business succession plan for their organizations.
Consider these factoids, and their interdependence on one another:
- 78 percent of small business owners plan to sell their companies to fund their retirement. ChannelE2E: So far, so good.
- The proceeds are needed to fund 60 percent to 100 percent of their retirement needs. ChannelE2E: Oh my. Those are really, really big percentages. And they reinforce what HTG Peer Groups has told me repeatedly: Total Service Providers, MSPs and VARs frequently underfund their retirement plans.
- Less than 30 percent of small business owners actually have a written succession plan. ChannelE2E: Game over for 70+ percent of small businesses if anything happens to the CEO.
Those stats come from a national survey of 182 advisors that specialize in small-business financial planning and are members of the Financial Planning Association.
Basically, financial planners are saying (A) small business owners think their business is their nest egg but (B) those same small business owners have no idea how to nurture and hatch the egg at its full potential. The FPA/CNBC Business Owner Succession Planning Survey results were released in April 2015.
Fast forward to the present, and I suspect few small business owners in the IT channel have taken corrective actions to (A) develop a succession plan and (B) properly fund retirement plans just in case a company sale doesn’t deliver all the retirement dollars they need…
Nice job pointing out the gaps but what actually goes into a succession plan? Financial account information? Legal stuff outlining how leaderships from one exec to another? A basic emergency plan for the staff? More details please.
Thanks for stopping by ChannelE2E. You raise some great questions. You will see detailed succession planning coverage on this site in the days ahead. (We haven’t officially launched the site yet but we’re glad you found it.)
In the meantime, I recommend the book “Walk Away Wealthy” by Mark M. Tepper. It’s written for all entrepreneurs and includes great nuggets on succession planning.