Emotions play a key role.
Cindy shared that one of the greatest deterrents to a business owner moving forward with developing a succession plan is the emotional impact that comes with planning.
It can be difficult for an owner to talk about their role and the future of the company without picturing themselves in it. They are often so emotionally tied to the businesses that even the discussion of it can be painful. However, often what the owner doesn’t realize is that they are in control of the transition and the future success of the company and that control comes from the planning. It provides the owner an opportunity to have conversations now and then over a determined period of time develop a method for the transferring of control. One of the greatest legacies an owner can leave behind is the successful transfer of the business to the next leader(s).
Tough conversations. Consult with all parties.
In the situation of a family business, the involved family members need to be a part of the discussion. Is there a logical leader and has that person been asked if they want to lead? If asked, the answer might surprise you. They may not want the responsibility, or they may prefer to only lead an area or division of the business. And then there is always the financial discussion and the ‘how to be fair’ with all involved. These are tough conversations, but what is far worse is the aftermath of doing nothing, which can often cause unrest and the feeling of uncertainty with your employees and customers, not to mention family members.
Permission to fail.
The actual transfer of control of the business, whether it takes place during a short time period or over several years commands the business owner to ‘let go.’ However, letting go slowly, giving the soon to transition leader permission to make decisions can be rewarding. Praising them when they succeed and then helping them when they fail, will provide them with the enhanced skill set to handle situations after the business owner exits the business. It is a lot like teaching your child to ride a bike. You put on training wheels to help them ride the bike, but they still have the support of the wheels. Then as time goes on you take off the wheels, but you still hold the back of the seat for the first few times they ride, then as their confidence builds, you let go. The joy that comes from seeing them soar in the business, or on the bike, is worth all the work put into the transition.
Everything has a cost.
Part of the planning process will be to ensure the viability of the business by minimizing financial demands. Many business owners delay retiring or giving up control of the business because they don’t think they can afford to retire, or perhaps they think their health is good and it will always be, or even more, they think the business won’t survive without them. Depending on the business and the overall transition plan, there are numerous ways to take care of the financial needs of the owner and keep the business stay viable. Further, estate taxes are not a myth – they exist. Having a plan that addresses how they are to be handled is important to the financial health of the family and the business.
No business owner or leader should do this alone. Cindy referred to it as the clients ‘team,’ which is the group of advisors that often include your attorney, accountant, banker, insurance advisor, etc. By having all of the ‘team’ members on the same page with your plan, the timeline and the process, you are safeguarding the transition and helping ensure it against misunderstandings that can lead to failure. Also, take time to introduce your soon to be transitioned leader(s) to the team and make them a part of the discussion as well. The more transparent the process, often the better the outcome.
Details define the process.
There are many more details in a business succession plan than those outlined here, but this is meant to get you thinking and hopefully moving in the right direction. A great next step is to assemble your ‘team’ and start discussions. The training wheels get put on the bike by you and your ‘team’ will help you with tools. Remember, you are not defined by the business instead, you define it and its future.