ALAMOSA – Most businesses in the San Luis Valley are small, family-owned and family-run operations with much of the family’s wealth invested in that business.  When it comes time to sale the business or transfer ownership to a family member, the decision can be difficult. There may be years of work and sacrifice invested in the business’ success. Taking planned and deliberate steps toward this transition can ease the process.

“It is important – well ahead of time – to have a succession plan,” according to Jason Medina, director of the San Luis Valley Small Business Development Center in Alamosa. “To quote Benjamin Franklin, ‘If you fail to plan, you are planning to fail!’ ”

Here are a few suggested actions gleaned from several sources that can help with a business transition:

Analyze the Current Economic Climate

Evaluate what is happening in the overall economy, locally, and in your business sector that could affect the sale of your business. Are interest rates high or low? Is your industry growing and what is the potential for growth in your region? Put together a list of potential buyers that should include family members, current employees, and competitors.

According to Medina, it is important to include others who may be effected by your business transition, particularly employees. “Be inclusive. Train employees to know what you know. They have an interest in your business and no one wants to see a business fail.”

Build a Group of Advisors

Most businesses already have a small group of professionals that help steer you and your business. People like an accountant, banker, insurance agent, attorney, financial advisor, or trusted business associate. Bring them together as an advisory group to help guide your transition. Each member will bring expertise from their field that can be valuable in developing your transition strategy. Seek their advice on possible deals and impacts on assets, taxes, and legal issues.

Prepare your business

The goal is to maximize the value of your business. Is it “exit-ready”? Look for issues that might negatively affect the sale. Review tax documents; confirm that financial documents are up-to-date, accurate, and provide transparency of financial condition; and be sure corporate papers are current.

Value Your Business

This is perhaps the most critical step in business transition planning. Work with a business broker, your banker, or your accountant to do an estimated valuation of your business. 

A valuation early in the process will give you an idea of the value of your business and give you time to address issues. In determining the value of your business, consider more than the value of inventory and real estate.

“Try to monetize the reputation, respect, and good name your business has earned over the years,” advised Medina. “They are valuable to you and the buyer.”

Determine Personal Financial Needs

Decide how much money you need to meet your financial goals after the business sale. Do expected net proceeds meet those goals? Include tax obligations in that calculation.

“It is really important, years ahead, to plan your retirement. Don’t sell yourself short,” Medina offered.

Talk With Your Family

Let your family know you plans as soon as possible. Especially if family members are involved in the business. Failure to keep them informed can cause lasting conflict in the family.

The San Luis Valley Small Business Development Center can assist business owners in planning the sale of their business by one-on-one counselling with a strategic planning consultant and a business succession planning template. Contact Jason Median at the SLV-SBDC at (719) 589-0312, or go online to www.slv-sbdc.com.