With the pro dealers battling lumber prices, supply chain issues and trying the maintain the safety of employees and customers during the COVID-19 crisis, their plates are full.
But Sam Brownell, owner and founder of Stratus Wealth Advisors, says now is the time to fine-tune a business when it comes to succession planning.
According to Stratus, more than 90% of business owners do not know what their business is worth, yet almost 80% of them plan to fund their retirement by selling their business.
“You are all essential and business has gone well for a lot of you,” Brownell said during a virtual discussion at the 2020 ProDealer Industry Summit.
Brownell says business owners and operators have to think about keeping a business running well, especially if market demand changes. The end result of focusing on the “now” during an uptick is having a business that is a well-oiled machine and prepared to hand over for at its maximum value if the owner decides to sell.
That’s where Stratus Wealth Advisors comes into play. As owners concentrate on overseeing their business, the firm can assist with planning based on data and decision points.
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.