Thursday, December 22, 2005

Succession plans without children

Back in September, Jan Pisancyzn spoke to a reporter from the Democrat & Chronicle. Jan offered advice for business owners whose children do not want to take over the business.

  1. Look at a trusted employee or two who have demonstrated some skill in running the business. In the case of a restaurant, the head chef might want to take over.
  2. Talk with competitors - and in the case of restaurants, suppliers - who may be interested in buying it.
  3. Look into hiring a business broker who does for businesses what real estate agents do for home sellers.
  4. Be realistic with expectations of how much the business is worth. Ask yourself, what is the current demand for this kind of business and what is a realistic price for the business.

Regarding item #4, the Research Network can help, too. We have a few sources in our reference collection that contain valuation formulas and rules of thumb plus chapters describing methods of determining a fair price. The titles we have are:

  • Handbook of Business Valuation edited by Thomas L. West and Jeffrey D. Jones, 1999
    Handbook of Small Business Valuation Formulas & Rules of Thumb by Glenn Desmond, 1993
  • Small Business Valuation Book by Lawrence W. Tuller, 1994
  • Small Business Valuation Formula Multiples by, 2004
  • Valuing a Business by Shannon P. Pratt, Robert F. Reilly, and Robert P. Schweihs, 2000

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