A sound and well-planned succession is the most important task facing business owners who wish to ensure the continuation of their business. If you are an owner, it is imperative that you regularly and critically review the current state of your succession plans. Procrastination hurts; not planning for the perpetuation of your business is good only if you want to have your business sold following death in order to pay estate taxes. If this were to happen, neither your family nor your employees will have much inclination to forgive your procrastination. Let me suggest a series of questions to guide your succession audit so that succession occurs in a way that is beneficial to your family and your business.
- First, do you have motivated successors? Are they interested and committed to your business? Do they possess more knowledge and experience in your business than you did at their age? If not, what are their plans 10 acquire the expertise they'll need to run your business in the future?
- Second, do the key managers in your business, including your relatives, work well together? Will they enthusiastically accept the future new leaders? Their support of the new leaders will be indispensable so, if it isn't there yet, you should begin developing it with them immediately.
- Third, is there a strategic plan to guide the operational decisions in your business? Business conditions, market competition, and the strengths of your business are constantly changing so your strategic plan must be reviewed and updated more frequently than was necessary when you began or first led your enterprise. To paraphrase an old axiom, good luck and fortune favor the well-prepared business.
- Fourth, can your heirs cooperate and work together? If not, will those who can't work together agree to leave the business and sell their ownership stake to other family members or the company? Feuding owners and relatives who are unwilling to accommodate the needs of others will destroy the vitality your business will need during the succession transition.
- Fifth, do you have competent business advisors who understand the challenges faced by your enterprise and respect your successors? Your accountant, banker, attorney, and other advisors should fully back your succession plans even though there is a high likelihood that your successor eventually will select his/her own group of advisors. .
- Sixth, do you have a functioning board of outside directors? Outsiders who are committed to providing you with sound, objective advice and expertise not only will help your business grow and prosper now but they also will play a key role during the succession transition. They will be available to offer guidance, oversight and support to your successor. They will help to ensure that management carries out its responsibility competently; additionally they also will help the surviving owners work together cooperatively.
- Seventh, are you preparing for your own retirement so that you won't interfere with the long-term strategy of your enterprise? Discuss your hopes and plans with family, friends and key advisors. Assume responsibility for the success of your successor and begin to involve yourself in new roles and activities, some of which may include charitable work, work with your trade association, or consulting to other family business owners.
- Lastly, does your estate plan recognize future family and business needs? You'll presumably want to transfer some wealth to your family and you'll also want to ensure the continuation of your business. These priorities may clash if you confuse inheritance with ownership. An uncomplicated ownership structure will best serve the needs of business continuity; generosity with non-business assets will best satisfy your wish to share some of your wealth with deserving family members. I hope these suggestions will be useful to you. If you have additional suggestions or would like to share your succession experiences, please write, fax, or call me so I can include your suggestions and/or experiences in a subsequent column.