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
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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).
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Develop some non-business interests. Make time to develop these
outside interests.
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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.
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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.
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Trim or eliminate those activities, expenses and personell that exist
essentially to satisfy your personal and/or ego needs.
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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
:
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understand what your business requires of its succession management
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will know what your business is worth and that the timing is right
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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.
This article was condensed from "In & Out
of Business . . . Happily"
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