Studies show that 70% of businesses fail as they move from the
first to the second generation of owners. Succession planning
is the process of transferring ownership from one group of owners
to another. Whether they are immediate family members, key employees
or a third party, a plan must align your personal, family and
financial objectives. Succession planning is not an end in itself.
Once engaged in the process, you have taken a major step forward
towards a successful Exit Strategy.
Questions to Answer and Issues to Address as you Develop Your
Succession Plan:
- Create a summary of key information that can serve as a reference
guide for your family and advisors. Could they find key documents
and information if you were not around?
- Determine the viability of an internal succession. Identify
strengths, weaknesses, and leadership capabilities of potential
successors. Who else is capable of running your business?
- Clarify family and business values. What happens when family
and business considerations collide?
- Clarify successor criteria. Do you have written guidelines
for the consideration, training, and choosing of successor candidates?
- Align your financial resources with the succession plan. Do
your estate plan and buy-sell agreement conform to your succession
plan?
- Provide adequate retirement income for yourself apart from
the business. Will your financial security be entirely dependent
on the future success of the business?
This is a difficult process and many businesses avoid it: It
can be time consuming and costly to set up. There is often discomfort
in dealing with family issues as they impact the business. We
have developed a short and easy to use tool to see what areas
can benefit most from succession planning. Click here to complete
the Succession Strategies® Self-Assessment.
Why Should I Plan?
The process of answering these questions will generate many benefits.
A well designed succession plan will:
- Perpetuate an organization that fosters a strong family identity;
- Safeguard the values, goals, and security of the family;
- Preserve the lifetime of hard work of the current generation
of owners;
- Allow the family and business to be proactive during the succession
transition;
- Pass the business control to the right team of managers and
owners while maintaining family unity; and
- Enhance the prospects for the future growth of the company.
Developing a plan is a long term process. You do not have to
go down this road alone. Our principals average more than 20 years
of experience in advising closely held businesses. Succession
Strategies® is a consulting firm specializing
in the creation, development and implementation of succession
plans for closely
held businesses. We help businesses survive succession while
preserving both the family and the business. Click here to view
our 10
Succession Strategies® and see how we can help you plan
a successful transition.
