Business value and business succession planning is a topic which should be considered with thought and careful planning in advance with plenty of time for consideration. One might consider advise from a CPA, attorney, business broker, banker, or other mentor. Whether you’re planning to retire, transition leadership, or sell your business, having a clear strategy ensures continuity, protects your legacy, and maximizes value.
Our workshop Oct 9th was cut short due to unexpected circumstances. The guest speakers shared resources and can be reached for additional information. Click here for the handout 👉 Dodge Legal Business Succession Handout from Tisha Dodge, attorney, and see the following SBDC resources will help you as you consider this process:
• Michael Corley, MBA, CPA michael@corcfo.com linkedin.com/in/mcorley/ See his quick “back of the napkin” calculation” 🎟
• Tisha Dodge, Dodge Legal Group, dodgelegal.com linkedin.com/in/tishadodge/ 4th Thursday monthly Zoom (next is Oct 23) dishwithtish.com
Valuation Basics: How Much Is Your Business Worth?
If you’re buying or selling, valuation is critical. Three standard approaches are:
- Asset Approach -Based on the fair market value of tangible and intangible assets minus liabilities. On assets, you are assuming they are in good order, not obsolete. Request a detailed asset list and when they are were placed in service. There are various valuation companies based on types of machinery/equipment. See the references at end for list of sites.
- Income Approach – Capitalizes expected returns (e.g., EBITDA or Seller’s Discretionary Earnings) using a capitalization rate that reflects risk and stability. This is an area that sellers document that could have hidden areas. When a business valuation is done they may normalize the return based on owner’s discretionary expenses. SDE could include bonus’, use of assets, other items that are not ordinary business income/expenses on the p/l. Check out Corley’s Linked article on this, as he offered a great back of the napkin approach linkedin.com/in/mcorley/
- Market Approach -Compares your business to similar businesses sold recently. This is common in real estate but harder for unique businesses. You can refer to online sites.
Tip: For closely held businesses, SDE (Seller’s Discretionary Earnings) is often the best metric because buyers are essentially purchasing the owner’s job.
Resources:
Business Valuation Multiples by Industry: Revenue & Earnings (SDE) – BizBuySell Report
http://www.BizQuest.com
http://www.Flippa.com
http://www.Restaurants-for-sale.com
http://www.MicroAcquire.com
http://www.BusinessesForSale.com
Why Succession Planning Is Essential
- The Silver Tsunami: Millions of businesses owned by baby boomers will change hands in the next decade. Yet, fewer than 15% of small business owners have a formal exit plan
- Without planning, the default option is often liquidation—a costly outcome for owners, employees, and local economies.
Succession planning answers two key questions:
- How do you want to exit?
- Why do you want to exit?
Your “why” could be financial security, family legacy, or simply more time for personal pursuits. Understanding this shapes your roadmap.
Key Questions to Guide Your Planning:
Financial
- How much money do I need to retire comfortably?
- Is my retirement plan dependent on the sale price of the business?
- Do I have a financial advisor to help me prepare?
Personal
- What does life look like after the sale?
- How will this decision impact your family?
- What will you do with time—travel, hobbies, volunteer work?
- Are there legacy actions of the company brand that you expect to carry on? Our guest attorney, Tisha Dodge, has given some examples where this became deal breakers.
Business
- What is my business worth today?
- Do I want to preserve the brand and legacy?
- What outcome do you want for employees and customers?
Exit Pathways and Options:
Common strategies:
- Family Transition: Passing ownership to family members.
- Employee Ownership: ESOPs, co-ops, or employee ownership trusts.
- Sale to Individual or Competitor: Strategic buyers often seek synergies.
- Liquidation: Closing doors and selling assets—usually a last resort and will not get the most asset value.
Steps to Build Your Roadmap 🛣️
1.Set Goals
Financial, personal, and business legacy.
2. Assess Resources
Managerial strength, operational systems, and company value. Assets, I.P., personnel, customers, products? Are there clear SOP? Policy, procedure, execution of duty instructions, job description, rules, strategies? How much is the current owner involved daily? Structure the systems for hand-off. Check off items:
✅ Assets
✅Financials
✅Operations
✅SOP
✅Products
✅Customers
✅Employees
✅Policies
3. Explore Options:
Understand transition pathways and implications.
4. Select and Execute Strategy
Create an action plan—avoid DIY; professional guidance is key. Get the books ready to clearly show SDE. Set a level of confidentiality – what should your customers know? What should suppliers know? What should your employees know?
5. Final Thought
Succession planning isn’t just about leaving—it’s about creating a future for your business beyond you. Start today by asking the right questions and exploring your options.
Contact your local SBDC Advisor for a BUSINESS SALE SNAPSHOT ACTION PLAN.
The following sites may be helpful to you when you are comparing values of assets in industries:
Construction Equipment:
- Equipmenttrader.com
- Ironplanet.com
- Machinefinder.com
- Mylittlesalesman.com
Machine Tools:
- CNCMachines.com
- Premierequipment.com
- Resellcnc.com
- Reveleationmachinery.com
- Machino.com
- Surplusrecord.com
Medical Equipment
- Dotmed.com
- Thelaserwarehouse.com
- Medprolasers.com
- MMEMED.com
Restaurant Equipment
Transportation Equipment
- carfax.com
- autotrader.com
- carmax.com
- commercialtrucktrader.com
- truckpaper.com
- Soarr.com
Trinity Valley SBDC (TVCCSBDC) is a partnership program with the U.S. Small Business Administration, the State of Texas, and Trinity Valley Community College. Advising services are offered by Trinity Valley SBDC without regard to race, color, age, national origin, religion, sex, or disability. Special provisions will be made for limited English speaking individuals and those with disabilities. Those interested may contact TVCC SBDC at 903-675-7403.
All opinions, conclusions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the U.S. Small Business Administration or other funding partners.