Succession planning for restaurants
PASSING THE TORCH AS A RESTAURATEUR
Is your business ready for sale, today? Is your business firing on all cylinders? If you had to sell today, would you get top dollar for it?
At some point, restaurant owners (or incumbents) are going to exit the business. The main questions are when and how? This is where business strategy and succession planning come into play.
WHAT IS SUCCESSION PLANNING?
Succession planning is the process of identifying and developing internal people (family or otherwise) so they can fill key business leadership positions in the company.
WHERE DO YOU START?
Determine your value.
Consider the following questions BEFORE you have to. Consult with a professional valuator who has experience in valuating restaurants, preferably someone who has helped an entrepreneur buy or sell. A professional valuator will help answer the following:
- Your net worth as the incumbent
- Your retirement goals
- The value of your brand: How large is the business? Are relationships with customers, suppliers, and partners rooted in personal goodwill or corporate goodwill? (Personal goodwill doesn’t attach to the business.) Will the brand have to start over in terms of building relationships after you retire?
- Life happens: What is your exit strategy? Your exit may be timely (on planned terms), or untimely (death or disability). Without an exit strategy in place, you could be forced out of business.
DEVELOP A STRATEGIC SUCCESSION PLAN
Take an honest, comprehensive look at your operations, and by doing the following:
- Get your financial information in order.
- Who will you eventually sell to? If selling to a third party, one of the first things they’ll want to see is your valuation. If your successor is a family member or members, don’t forget to establish governance for the family components.
- Employees: How well are your employees trained? What is your retention rate?
- Your relationships: Convert personal goodwill into corporate goodwill.
- Your values: Articulate your brand and your family values.
- Take the balanced scorecard approach, which is broken down into four buckets: financial, customer market, operations and HR. Determine the three most critical objectives for each of those buckets.
- What are your key performance indicators? Do you know?
- Who is responsible for making sure it all gets done?
- Have regular conversations between the incumbent and successors. The succession process can take anywhere from three to five years.
- Grooming: Prepare your staff and operations for a smooth transition. Institute codes of conduct, training, policies and practices that will stand the tests of time and succession.
It’s never too early to start planning for succession. Here’s a suggested to-do list:
- Establish family business rules
- Visualize retirement
- Visualize what being ready for sale looks like
- Understand what your business looks like when firing on all cylinders
- Envision your exit strategy, and develop a plan to support it
- Start thinking about buyers, and construct your value propositions around those buyers
- If you’re in a family business, work on family matters. If you have a healthy business but an unhappy family, does it really matter?
- Develop a role for the incumbent after the transition
- Prepare the business well in advance by attending to key value drivers
- Don’t delay succession planning. Start early and get your ducks in a row while the waters are calm
Perry Muhlbier is a family business advisor with KPMG. KPMG is a Canadian leader in delivering audit, tax, and advisory services, kpmg.com.
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