North Dakota SBDC launches business succession guide
It has always been one of the biggest questions looming in business. The North Dakota Small Business Development Centers has released a new exit and succession planning guide to help business owners prepare for a step that is sometimes uncomfortable to think about.
GRAND FORKS — Business owners might be worried about the rising inflation rate, hiring or other issues plaguing their world right now. But an alarming number do not sell their business at the end of their career.
Tiffany Ford, director of the UND Center for Business Engagement & Development, said it shows a lack of preparation.
“With more preparation, we would anticipate that that statistic would actually improve,” Ford said. “We would rather see the majority of businesses that are for sale on the market sell rather than just 20%, and it's for a variety of reasons. But really, the biggest one that encompasses all the pieces is that business owners are not prepared to sell.”
A central question — "Do I have an exit plan?" — is too often overlooked, Ford said. The North Dakota Small Business Development Centers has released a new exit and succession planning guide to help business owners prepare for a step that is sometimes uncomfortable to consider.
Ford said some business owners in North Dakota are not starting far enough in advance to examine their books and operations to make sure their records are clean to ensure a successful sale, which is at the forefront of the SBDC’s guide. Selling the business at the end of an owner’s span at the helm should be a priority.
“This is a topic that people don't like to talk about,” Ford said. “It's a topic that kind of creates a sense of mortality. People don't like talking about what they do at the end of life. Not that it means that it's someone's end of life, but sometimes it can be really emotional. So the more we talk about this as a regular process that is part of business, the more these businesses will succeed at this business stage.”
The issue of succession has come to the forefront because of the state’s shift in population. She estimates that about two-thirds of all North Dakota business owners are baby boomers who are aging out of ownership. Many are looking to retire, which prompted the SBDC to work more on its succession guide in recent years.
The guide touts the “Five Ds” — death, disability, divorce, disagreement and distress. These are what the succession guide purports as factors for which many business owners do not plan. If an owner is on the right track when planning a business strategy, they should be preparing to exit the business as well. Ford said the SBDC has begun working on developing these strategies with clients before they even open their business.
“That very first concept of creating a business plan, that blueprint for what your business is going to look like, it actually needs to include some thought on exit,” Ford said. “So you work really hard on trying to figure out, ‘How do I build this business?’ But you also have to think on the front end about how you exit the business, and when you're thinking about that really from day one, you have this concept of the life cycle as a whole.”
One of the guide’s goals is to allow business owners to achieve a certain level of income from the sale of their business while maximizing its value to set up a new owner for success.
The fruits of preparation can keep North Dakota’s economy running more smoothly and ensure communities have essential products and services.
“If they haven't done a good job of planning for their exit or planning to sell that business to someone so that it can continue to succeed, what we end up with is empty storefronts on our main streets,” Ford said. “And that is detrimental to our communities. It's detrimental to our citizens, and some of our communities are losing really essential services and products that are available locally to them.”