According to Brownell, 27% of the value of an average business is not realized in sale or transfer of ownership. He wants companies to be able to predict profits and growth before maximizing a company’s exit value.
He says companies and their owners need to build additional wealth outside of the company, including real estate investments or through 401K holdings. This in addition to building wealth inside the company, including upgrades.
Other obstacles companies need to clear, prior to sale, is having legal work cleaned up and prepared. Brownell also suggests that companies make sure that there are micro-successors in the company when it comes to personnel. If a top sales or marketing talent leaves the company prior to sale, it devalues the company and places an added burden on the next owner.
“All that institutional knowledge just walked out the door,” Brownell says. “You don’t want that knowledge lost with the individual employee.”
Brownell also notes that running and selling an independent business is important due to their ties to the local community.
“You’ve left a legacy in your community,” Brownell says.
The ProDealer Industry Summit, held entirely virtual this year, is presented by the National Lumber and Building Material Dealers Association and HBSDealer. The event runs through Oct. 9. Click here for more information or to register for the event.
Visit Straus Wealth Advisors for more information about succession planning.