We've talked about what Succession Planning is, now let's look at the three key inputs. Maths + Timing + People.
With regard to Maths, we mean the metrics to get your business ready for a succession plan.
+ Is your business growing?
+ Does the profitability allow for repayment of debt (to acquire the business)?
+ Can the new owner extract cash from the business, or is it caught up in debt repayments for prior capital purchases?
A financial planning business usually trades between a 5-6 times multiple of profit, meaning a 16.66-20% return on investment. Accounting is 3.5 - 4 times, meaning a 25% return on investment. For a business achieving average profitability, we should be able to help a succession plan work mathematically.
If you'd like to understand how your business stacks up for a succession plan, use the button below to contact our office.
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