You’re busy serving customers. Managing employees. Overseeing the day-to-day operations of your business. Stepping down as the head of your company may not be on your radar, but sooner or later you’ll need to think about what will happen to your business once you’re out of the picture. We recommend that business owners start thinking about their business succession plan at least five years before planning to implement it.
As a business owner, you’ve put in a lot of blood, sweat and tears into your business. You’ve sacrificed a lot to get where you are and have a huge emotional attachment to your business. You’re good at making products, growing the business and dealing with customers. But the whole concept of exiting your business might be foreign to you. It’s unchartered waters. Why should you spend time and money on something that is so far away from implementing?
It’s not hard for all business owners. For those of you who want to die at your desk, succession planning is easy. It is also easier for those of you who plan to sell your business to the highest bidder and then move to a tropical island and forgot about the business forever. You just have to focus on building value in the business and exiting at the right time.
Succession Planning Can Be Difficult … But Worth It
But if you want your business to continue once you leave, it’s not such an easy process. There are complex legal and financial issues to figure out (estate plans, retirement needs, legal documents, etc.) and equally complex soft issues (choosing the next leaders, sibling rivalry, giving up control, etc.). You’ve got to figure out a way to leave and not kill the business.
The business owner that wants the business to continue must be willing to face difficult business, personal, and family issues in order to start the succession planning process. There are conflicting goals. What is good for you personally may not be the best for the business and other family members. In addition, there are other stakeholder needs that need to be addressed during the succession planning process (employees, other shareholders, customers and the IRS).
In order to be successful, you have to sort out your own personal desires, make sure that business can continue without you and maintain family harmony.
The Starting Point
The hardest step in succession planning is starting. Sounds so simple and like the Nike ad says “Just Do It.” It’s not that simple. This is the most difficult step because the business owner must face difficult personal, family and business issues in addition to the complex tax and legal stuff. There’s usually no sense of urgency to start the process and it is very easy to avoid starting the process.
Your desired legacy is the starting point. In order to achieve this legacy you need to prioritize the succession planning process well before your desired time to leave the business. Once you develop your plan it needs to be communicated to the right people and placed into action or the sword of Damocles will be hanging over your head.
Need Succession Planning Help?
Succession planning can be a daunting and overwhelming process for a business owner. Hopefully by now you know what kind of legacy you want to leave for your business. The next step is to put together a plan to ensure that your legacy is carried on. Not sure where to begin putting together a plan? Contact Rea & Associates. Our team of Ohio business valuation and succession planning professionals can help you put the pieces of your succession planning puzzle in place.
Authors: Tim McDaniel, CPA/ABV, ASA, CBA, and Holly Taylor, CPA, ABV, ASA (Dublin office)
Check out these other blog posts about succession planning by Tim McDaniel:
- How Do You Create A Succession Plan?
- How Do You Choose a Business Exit Strategy?
- How Do I Keep My Succession Plan On Course?