If you’re a business owner and you are thinking about retirement, then you need to start thinking about succession planning. It’s critical to the best interests of your family and your finances. It’s also critical to the success of your successor.

A 2022 MassMutual study indicates that only 8 percent of business owners have a completed the process of developing written succession plan. Equally troubling is the fact that about one in four successors, those that the owner has targeted to take over his or her company, do not know that they are in the succession plan.

Think about where you sit on your company’s organizational chart.

• Are you at the top and all your key managers and employees cascade like a waterfall underneath?

• Or are you stuck in the middle and everyone and everything simply orbits around you?

If the answer is the latter, then you most likely have an owner-dependent business.

Owner dependency is one of the bigger risks that exist in small businesses today. And most likely the reason you won’t receive full value for your business when the time comes to sell, assuming you can even sell it at all.

We’ve all heard stories of contested wills and disinherited ne’er-do-wells among the rich and famous. Hollywood has used this storyline countless times, creating a motive for the bad guy or a righteous quest for good. It makes for great theater and even better supermarket tabloid headlines, but for the rest of us, it’s something we actively seek to avoid.

In theory, providing equal shares of your estate to your children is a case of simple math. Add up the assets and divide by the number of kids. But the problem for business owners is that the business, often the estate’s largest asset, is illiquid. There’s no cash to divvy up. And if the business is to be passed down to the next generation — specifically to those actively involved in the business — how do you make the others "whole" while keeping the business in one piece?

Before you embark on a strategy to make your business more valuable and transferable, be sure to identify and correct the risks that might threaten your company’s success.

“All of that work is futile if you don’t de-risk the business first,” said Brian Trzcinski, the director of business market development at MassMutual. Look for red flags that can indicate potential threats and take action to help eliminate any that may interfere with your plans to grow and monetize your business.

Baby boomers own approximately 4.5 million businesses with employees in the United States, and it’s estimated that 70 percent of these owners will be retiring over the next decade. According to the 2022 MassMutual Business Owner Perspectives Study, 60 percent of today’s owners say selling their businesses is their preferred exit strategy.

The problem? Historically, 75–80 percent of businesses that get put up for sale never sell.

So why do so few businesses transact? Simple. The business (and the owner) isn’t ready.

There’s one question many small business owners ask themselves everyday: “What is the true value of my business?”

It’s an important question because, whether you realize it or not, the value of your business will have a big impact on both personal and professional aspects of your life. So, knowing the answer is vitally important.

Knowing the value of your business is always important, but changing economic and business factors make having a current valuation even more vital.