So, you have finally decided to think about what your business would look like without you at the helm. Before you transition or sell your business, you first need to determine if you are ready for what’s about to happen. Yes, I said, “happen.” Sounds like I’m going to guide you through a train wreck, and that is exactly what you were thinking when you read the title of this post. In reality, you have been putting this off for the last ten years because you thought it was going to be an ordeal, or your own personal nightmare. The key to a successful transition is preparedness. Have you ever heard the adage, “It’s better to have a bad plan than no plan?” So, let’s get started on your plan and see how it turns out.
First, do you want ownership of the business to remain in the family? If so, then what is the current age and involvement of your family? I’m talking about their age range right now: a) Out of college, b) in their 30’s, c) currently in the business, or d) already an integral part of the business. Obviously, the more they are involved in decision-making the easier the transition.
Gauging your family’s ability to takeover a business that you have poured your life into can be stressful depending upon how involved you’ve had the family in the decision-making. If you have kept everyone in the dark, then you need to start introducing the goals and vision of the business before you consider retirement. You’ll have to work your way up the mountain before you throw succession planning at them.
Second, are you prepared for succession planning? It’s best if you find out what it’s like from someone who has already gone through a plan successfully. Ask your professional advisors for some guidance or some reading they can recommend. One of the books I give family business owners to read is, “Beating the Midas Curse”, by Perry L. Cochell & Rod Zeeb, 2nd Edition 2013, GenUs Publications. Only 1 out of 10 families successfully pass their prosperity from one generation to the next. Read this book, and see if you can beat the odds.
Third, what is a safe forum for all the key stakeholders to come to a consensus on the issues? You’ll need to develop a clear and acceptable vision for the business before opening it up for discussion. This process will lead into the selection of your successor. If it’s one of the children, help them build a profile and credibility within the family and the business community.
Next, have an estate plan developed that clearly indicates how ownership of the business will be distributed among members of the next generation. This plan will need to include contingencies for events such as death, disability or failure to identify an appropriate successor.
In the next installment, we’ll discuss the indicators of succession viability.