Funding for transition planning services can poise more businesses for success

Many Minnesota business owners are Baby Boomers, and expected to retire within the next 10 to 15 years. Unless they start planning now, then rushed and forced transitions could lead to shuttered businesses on main streets across the state.

Succession planning is the key to keeping those businesses open and serving their communities, Rep. Ben Lien (DFL-Moorhead) told the House Jobs and Economic Development Finance Division Thursday.

Rep. Ben Lien

He sponsors HF1019, which would appropriate $3 million – evenly divided between Fiscal Years 2020 and 2021 – to support business transition planning services at small business development centers, specifically targeting economically disadvantaged communities. The appropriation would also qualify as a match for additional federal funds, Lien said.

The division held the bill over for possible omnibus bill inclusion. Sen. Paul Utke (DFL-Park Rapids) sponsors a companion, SF1104, which awaits action by the Senate Jobs and Economic Growth Finance and Policy Committee.

“No one goes through the work and the risk and sacrifice of starting a business without hoping that it will last,” said Matt Magness, executive director of West Central Minnesota Small Business Development Center.

But business owners might not necessarily like thinking about how their businesses will function without them, or realize they need to start the succession process three to five years before they intend to leave, he said.

“They need a lot of guidance, they need tools, and they need resources” Magness said.

Succession planning is a “multi-disciplinary process,” but small-business development centers offer a wide range of services for free. These include:

• connecting business owners and potential buyers;
• informing people about the transition and succession process, as well as its importance;
• helping prospective buyers understand financing options and requirements;
• getting businesses properly valuated;
• developing multi-disciplinary transition teams, including attorneys and accountants; and
• encouraging strategic decision-making to encourage future business growth.

Usually, business owners have a large part of their net worth tied up in their businesses, so planning is necessary to make sure that they can generate retirement income from the purchase. It also poises new owners for success, along with employees and the greater community, Magness said.

Some employers worry that announcing their plan to eventually sell could send employees running and discourage business, but the opposite is actually true. It inspires confidence when business owners share their commitment to finding someone appropriate to take over the business, retain employees, and keep those services in the community, he said.