10 steps to effective succession planning
Succession Planning
When There's No Apparent Heir
By Theodore P. Burbank, FCBI
Do you sometimes find yourself wishing you were an employee and not the boss?
As the boss you aren't concerned with being fired, but -- neither can you
quit. Too much depends upon you for you to even consider quitting. The
business you worked so long and hard to build, your employees, their families
and yours, rely upon you to keep the ship on an even keel.
Perhaps you have read articles on succession planning - how to pass the baton
to family or employees. However, the kids don't seem interested in taking
over and you don't have an employee who could fill your shoes. What to do?
Somehow the thought of selling your business is distasteful to you. Perhaps
because the business is a reflection of you. It reflects your vision,
personality and dreams. The business is almost like a child in that respect.
You don't sell children, do you? Certainly not, but as the child
matures natural forces of nature call for a change. Eventually the child
marries and begins a new family. The new family contains elements that are
a reflection of you. This is the way our values and principles continue.
Succession Planning is very much the same in that the suitor has to be the
right person, one who will do right by the business. In addition, you will
expect a handsome dowry before you give your approval and let the new operator
take over.
Ten Steps to Effective Succession Planning
- Face the reality that
both you and your business are constantly changing. Eventually the
needs and requirements of your business will conflict with your personal
lifestyle needs (See
One Minute Quiz for Business Owners Only).
- Develop some
non-business interests. Make time to develop these outside interests.
- Begin to establish
financial resources independent of your business. Take advantage of
opportunities outside the business as well as tax advantaged retirement
programs.
- Start sooner, not
later. Transition takes time. You have a lot to do before you
can let go.
- Identify your ideal
replacement. Only when you understand what your company is today can
you identify what it could be tomorrow. List the skills, interests,
talents and resources your successor must possess in order to capitalize
upon the opportunity your business represents.
- Prepare the business
for transfer. Take stock of those areas where your personality, skills
or influence are key elements of your firm's success. Begin a program
to transfer these activities to others within the company.
- Review the company's
financial statements. In most private companies the need to show a
profit is overridden by a desire to minimize taxation. Make sure you
and/or you accountant hasn't done this job too well. It is important
for a wary suitor and his/her advisors to be able to easily identify the
discretionary and non recurring expenses that can be added to profits.
- Trim or eliminate those
activities, expenses and personell that exist essentially to satisfy your
personal and/or ego needs.
- Seek and use advisors.
Succession planning is very personal and can be an emotional process.
It's not unlike giving your daughter away in marriage, or to some,
putting a child up for adoption. This is a once in a lifetime action.
You need every advantage you can garner.
- Determine the value of
your company. In order to accomplish this you need to know the
difference between the various types of buyers active in today's
marketplace. To some your company may appear worthless, to others it
may be worth millions!
Summary
Before you act, you must prepare and have a plan. Ideally you will :
- understand what your business
requires of its succession management
- will know what your business
is worth and that the timing is right
- will have identified the
attributes of your ideal successor
Ultimately, one of two options exist for every business owner. Either, (a)
the succession of your business will be an event controlled and planned by you
or, (b) it will be an unplanned occurrence brought on by outside forces. Others
point out more harshly that eventually; either a succession plan is implemented
or the business closes down. For the good of your business, your
employees, customers, vendors and family -- decide. Decide to begin
planning your succession now.
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