According to Brian T. Franco, 75% of business owners don’t have a succession plan.
As the founder and CEO of Meritage Partners, a business sale and acquisition advisory firm in Newport Beach, California, Franco has guided more than $2 billion in business sales. He is also the author of “Inevitable Exit,” which outlines a practical approach for building owner-run companies that sell for top value. ID recently sat down with Franco to discuss how entrepreneurs can plan and execute successful exits.
Industrial Distribution: Let’s talk about succession planning, because this can be an issue in our industry for sure. You’ve said in the past that it’s key for leaders to cultivate a business that can survive without them. I think that’s great advice. Tell us a little bit more about what you’d suggest they do in order to go down that path.
Brian Franco: It really starts with a paradigm shift. As business owners, we’re so focused on the day-to-day to produce an income for the business so that ultimately we could sustain a lifestyle that we all desire. And that income allows for that. But along the way, whether the business owners know this or not, they’ve built a very valuable asset, and that asset is their company. And so there’s going to be a time when they have to look at that company and say, “Okay, what do we do?” There has to be some succession plan. And there are two pathways: you could sell it internally or you could sell it externally. But this is where the outcome paradigm shift occurs, because the outcome is, how do you take that asset and sell it to ready, willing and able investors in the marketplace?
This certainly requires massive amounts of planning and execution because, in addition to the income that investors are acquiring, they’re also interested in acquiring companies that have predictable revenue streams. There are no guarantees in life, we all know this, but there are patterns of companies, especially companies that have long-term contracts and agreements, and that’s commonly found in manufacturing, industrial distribution, or service-related companies. But it starts with the paradigm shift.
ID: It sounds like, by and large, investment experts are expecting 2026 to be an active year for deals. If there are business leaders that have been sitting on the sidelines as they waited out some uncertainty in the market and they’re ready to jump in in 2026, how would you suggest they prepare to take advantage of a favorable market?
Brian T. Franco, Meritage Partners
So when you think of it in that context, that company needs to be ready, like a child, for the real world. So how do you get it ready? Well, you need to have transferable systems, you have to have a leadership team that can exist with the company, both pre-closing and post. And if you are the owner and you are heavily involved in the day-to-day of the operations, that needs to be solved for. The way to accomplish that is really to have continuity in the company and really show investors in the market that the business exists whether you exist or not as an owner or a stakeholder. And so what can you do and what should you be considering and thinking about implementing?
Really, it’s documenting your processes. There are a lot of methods of how to go about this. There are standard operating procedures that could be applied to marketing, sales, manufacturing, distribution, so on and so forth. But you need to document your process and your team needs to understand what the expectations are, what the measurements will be in terms of KPIs and make sure they’re accountable to hitting those, because the more the business and the employees rely on the systems, the less they rely upon the owner of the company. And when you can do that, it doesn’t matter who owns your business; what matters is that that business is a platform that can be scaled.
So certainly working hard to implement those systems, removing yourself as an owner out of the day-to-day — it’s a very difficult process as an individual, but once you start to recognize the value of implementing these sorts of tools and processes, the outcome is massive. It means a higher valuation for your company, and more favorable deal terms.
ID: So say you’re coming into 2026 and you don’t have any of these guidelines established for your business at this point. You don’t have the SOPs in place, you don’t have the KPIs. Are you out of luck for taking advantage of this year?
BF: If you have 12 months, we can put you through a crash course. In my book, “Inevitable Exit,” I walk through the seven value drivers that investors are looking for in every company. And so if you can spend three to six months to really look at your business and apply those value drivers, you’ll be a step further.
We actually are launching a virtual training program where we can take participants through a program to teach them on a faster basis. And so we’re really working hard to empower business owners to educate themselves and then implement those aspects into their company. So if you have 12 months, you have enough time.
ID: Occasionally we’ll get emails or calls from folks who say, “I would like to exit the market and I don’t have family to sell to. Do you have any ideas? I don’t know what to do.” Are you finding that it’s more and more common that folks are getting to the twilight of their career and realizing that they don’t at all have an exit strategy?
BF: Over 75% of business owners do not have an exit strategy. And it sounds surprising, but it’s a real statistic. A lot of times, business owners are, for the first time, thinking about an exit when they receive an unsolicited offer from an investor or a buyer in the marketplace. And then at that moment, they’re saying to themselves, “Oh, wow. What do we do with this offer? Is this a good offer? Is this a bad offer?” A lot of times they don’t know.
I just interviewed somebody on my podcast recently and he was telling me his father’s exit strategy plan was to hand the business off to him as his son. And it was hard for him to tell his father, “Dad, I love you. I care for you. I respect you. But I do not want to do what you do.” And we see this more often than not.
My own father had a very successful business and that business deteriorated over time with his health, to the point where my father had to close the doors of his company. I’m in that same bucket, right? So to watch a client – but, more specifically, your father, go through this – it really opens your eyes to, “Wait a minute, there has to be something better.” And that was a big part of the inspiration that I have had in my career and for writing the book. I don’t want families to go through what my family went through.
And this is really a playbook for folks to get serious about their exit and their succession and giving them the insider look as to how investors look at their company. What are they looking for? Do they want to know how many employees you have? Do they want to know how much revenue you have? How much profit, how many customers, customer concentration? The answer is yes to all of the above, but where do you start?
And we see it time and time again. Whether the children want to get involved or not, [they sometimes don’t have] the capacity to acquire the company internally from the family because it takes cash. Cash comes in the form of debt or equity, right? So you have to raise one or both of those to make that all happen. So it is hard to watch. I saw it in my own family, as I described. The harsh truth is we have to be able to put our future in our own hands, as we’re all inevitably going to exit.
Would you rather exit on your terms or someone else’s?
ID: Where can our readers learn more about this, and where can they find your book?
BF: I founded Meritage Partners, and we work with industrial distribution companies to position them for the highest valuation as possible in the market. And so, we have a couple tools out there.
My book could be found at Inevitableexit.com. We also built out an AI tool called Applebites.ai. It’s a valuation tool and an assessment tool. We’re measuring both the valuation range of your company, and then we’re grading the transferability of your business. And if you’re not getting top-of-your-class grades, that’s okay, because we’ll give you actionable advice on what you could do even in the first 90 days of learning what is required. There’s a lot that can be done, believe it or not. You don’t need two years, three years, five years. There’s a fast-track pathway here. Yes, it’s going to be a heavy workload, but that’s what we’re here for and that’s how we help.
This article originally appeared in the March/April issue of Industrial Distribution magazine. Sign up here to subscribe to ID’s Today in Industrial Distribution daily newsletter.
