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Succeed at Succession

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Thinking about retirement? Machine-shop owners and other manufacturers who want to sell their businesses and retire have options. Below are some tips to begin your succession plan.

  1. Start early
    Business owners should start planning their exits years before they plan to leave. Start thinking today about when your exit might happen, who will take over, and how the business might change. If you are already nearing retirement and haven’t started planning, don’t despair. Any advance planning is better than none. 
     
  2. Succession Planning 101
    Questions to Consider

    • Where do you see your company – and yourself – in 10 years?
    • Who will take over the leadership and ownership of your company?
    • Have you considered options beyond your heirs (or lack of heirs)?
    • Has your business been valued recently?
    • Have you considered the financial and tax implications of retiring for you and the company?
    • Are you ready to relinquish control?
  3. Look beyond your family
    Perhaps you have an adult child who is already involved in the company. They may be the obvious choice to inherit the family business and take over your leadership role. But what if you don’t have an heir, or if your heirs aren’t interested in the family business? There are other options.

    Consider key employees who may want to take over the company and keep the doors open. A mentorship program for senior leadership may help you identify potential leaders in your midst. While employees likely will not have the funds to buy the company outright, legal and financial experts can help you devise a plan that allows them to gain stock over time.
     
  4. Sell to a third party
    Is there a competitor you respect who may be interested in buying your company? Do you know an up-and-coming star in your industry who would make a great leader (even if they don’t currently work for your company)? Are there local entrepreneurs who would consider venturing into your space?

    Consider approaching other companies or individuals and exploring the idea of transferring ownership. Of course, you should consult an attorney before having in-depth conversations to ensure that all information is protected via non-disclosure agreements.
     
  5. Use a broker
    There are brokers that purchase small manufacturing firms. Perform a Google search to find a local or national broker who may be able to help. Most brokers will complete a preliminary evaluation of your company with no upfront fees. 

These are just a few tips to plan for your future. Succession planning is an evolving process. You can find more strategies in the Deloitte's Business Succession Planning Report.

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