The\nSmall Business Development Center (SBDC), supported by our Robbins College of\nBusiness and Entrepreneurship, exists to increase economic prosperity in Kansas\nby helping entrepreneurs and small business owners start and grow their\nbusinesses. Headquartered in Topeka, the Kansas Small Business Development\nCenters throughout the state are funded through federal grants, local colleges\nand universities, and the state of Kansas. It is a system of 12 centers \u2013\nseveral located on university campuses. All 12 centers are overseen by Fort\nHays State University.<\/p>\n\n\n\n
I\nrecently visited with Rick Feltenberger, the director of the SBDC at Fort Hays\nState. I learned that as of August 2021, the state of Kansas started 174 fewer\nbusinesses than during all of 2020. This makes retaining critical\ninfrastructure businesses (grocery stores, veterinary clinics, pharmacies,\nlumber\/hardware stores, etc.) essential to economic prosperity. Rick also\nshared some information specific to businesses in rural Kansas, including: <\/p>\n\n\n\n
\u2022\n50% of business owners are 51 or older.<\/p>\n\n\n\n
\u2022\nOnly 30% of family-owned businesses successfully transition to the second\ngeneration. <\/p>\n\n\n\n
\u2022\n20% plan on closing and conducting an orderly liquidation of assets. <\/p>\n\n\n\n
Rick\nbelieves that one potential solution lies in careful business exit or\nsuccession planning. This process ensures business owners are fully prepared to\ntransfer the single largest financial asset they have to a new owner, whether\nit be a family member or a third party. Rick cautions that many business owners\nconfuse the successful transition of their business with the simple act of\nselling the business. A successful transition occurs on the owner\u2019s terms,\ntheir timeline, and their price. It takes planning to get there. Focusing on\n\u201cselling\u201d doesn\u2019t put the owner in a sound financial position.<\/p>\n\n\n\n
Typical mistakes\nbusiness owners make as they look toward exiting the business:<\/strong><\/p>\n\n\n\n \u2022\nUnderestimating the amount of money\nrequired to meet their retirement or post-business lifestyle.<\/strong> Our heritage,\nwork ethic, and upbringing in rural America make us unique. It also makes us\nvery modest in our outlook. To maintain a retirement income of $30,000 per year\nrequires a nest egg of about $750,000. If personal savings and investment can\u2019t\ncover this, owners will need to maximize the net proceeds from their business.<\/p>\n\n\n\n \u2022\nAssuming that their business will\nnaturally be attractive to a potential buyer.<\/strong> Beauty is in the eyes of the\nbeholder, and prospective buyers may evaluate the value of a business very\ndifferently than the current owner. <\/p>\n\n\n\n \u2022\nOverestimating the actual value of their\nbusiness.<\/strong> Valuing a business that is preparing for a transition is slightly\ncomplex, but the formula is very simple: Earnings x a market multiple factored\nfor risk = Value. Earnings are the cash flow generated from the business.\nMarket multiples are determined in the private equity markets, and every\nindustry has a range of these multiples based on the relative risk level of the\nbusiness. While owners can\u2019t control the multiples, they absolutely can control\nwhere they land in that range of multiples by making their business less risky\nto a buyer. The lower the risk, the higher the multiple and the greater the\nvalue. It really is that simple. <\/p>\n\n\n\n Essential first steps\nin business succession planning<\/strong><\/p>\n\n\n\n \u2022\nOrganize your financial reporting.<\/strong>\nThis would include developing a personal financial statement, a detailed view\nof the owner\u2019s assets and liabilities. The process isn\u2019t difficult, and the\nowner\u2019s financial planner or a certified exit planning advisor can usually\nhelp.<\/p>\n\n\n\n \u2022\nEnsure your business financials are\nclean and accurate.<\/strong> The best way to do this is to have your accountant\nprepare income statements and balance sheets along with business tax returns\nfor the past three years, plus detailed statements for the last 12 months. <\/p>\n\n\n\n \u2022\nCommunicate your intentions to your\ncustomers and potential buyers.<\/strong> The path to attracting a potential buyer\ncan be tricky, so you will need a well-thought-out plan and a good team of\nadvisors. The good news is that your buyer might be living in your community.\nThe bad news is that no one will know that you are looking for a buyer unless\nyou tell them. Forget the myths about losing customers or employees; it doesn\u2019t\nhappen if you properly communicate your intentions. <\/p>\n\n\n\n \u2022\nContact your local Economic Development\nOffice and Chamber of Commerce.<\/strong> They may know of an interested person. If\nnothing else, they can quietly get the word out for you. <\/p>\n\n\n\n \u2022\nFind an apprentice who would like to own\nyour business.<\/strong> This isn\u2019t a quick option as it could take two to three\nyears to train an apprentice, often even longer. This is why it makes so much\nsense to start the process long before you face an event that requires you to\nleave the business.<\/p>\n\n\n\n Feltenberger\nis one of three certified exit planning advisors in Kansas. He can help any\nbusiness owner in the state of Kansas plan for a successful transition. The\nKansas SBDC also hosts the Kansas Center for Business Transition\n(ksbiztransition.com), a web resource where business owners can find an array\nof do-it-yourself tools to get started on the process. If you want to learn\nmore about partnering with the SBDC, visit https:\/\/www.fhsu.edu\/ksbdc\/<\/a> or contact Rick at RickFelten@ksbdc.net<\/a> or 785-628-5615. <\/p>\n\n\n\n Tisa Mason is president of Fort Hays State University.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":" The Small Business Development Center (SBDC), supported by our Robbins College of Business and Entrepreneurship, exists to increase economic prosperity in Kansas by helping entrepreneurs… <\/p>\n","protected":false},"author":1,"featured_media":37698,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[12323,55],"tags":[],"class_list":["post-62157","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-campus-life","category-opinion"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/tigermedianet.com\/wp-content\/uploads\/2018\/04\/Mason-Tisa-040A6662.jpg?fit=750%2C1050&ssl=1","jetpack_sharing_enabled":true,"jetpack-related-posts":[],"jetpack_likes_enabled":true,"_links":{"self":[{"href":"https:\/\/tigermedianet.com\/index.php?rest_route=\/wp\/v2\/posts\/62157","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/tigermedianet.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/tigermedianet.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/tigermedianet.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/tigermedianet.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=62157"}],"version-history":[{"count":1,"href":"https:\/\/tigermedianet.com\/index.php?rest_route=\/wp\/v2\/posts\/62157\/revisions"}],"predecessor-version":[{"id":62158,"href":"https:\/\/tigermedianet.com\/index.php?rest_route=\/wp\/v2\/posts\/62157\/revisions\/62158"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/tigermedianet.com\/index.php?rest_route=\/wp\/v2\/media\/37698"}],"wp:attachment":[{"href":"https:\/\/tigermedianet.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=62157"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/tigermedianet.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=62157"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/tigermedianet.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=62157"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}