subject: Why Plan For Business Succession? [print this page] For some entrepreneurs, planning for succession and following through on a plan is painful. They started the business and regardless of how much it has grown or changed, it is still their "baby". They imagined it, created it, nurtured it through tough times, and watched it grow. They are intimately connected with its daily ebb and flow. They can't imagine what they would do if they couldn't continue to lead the organization.
One business owner I know had a very successful company. He worked hard building all aspects of the profitable corporation. His family life was successful, his business was successful and he was well respected in his community.
At an appropriate time he announced that he was going to sell his business and retire in five years. His wife retired right on time, but the date for his planned retirement came and went. Friends and relatives wondered, "What happened?"
His plan wasn't really a plan. It was barely a good intention, perhaps just a way to get his wife off his back. Then, as the deadline approached, he threw a monkey wrench into the business effectively creating a huge challenge that only he could solve.
He renounced his intention and like Superman, he would swoop in to save the day. Unfortunately, the crisis he created was big and things went horribly wrong. Salespeople quit. He lost customers. He lost brand value. He lost the confidence of his suppliers. A once profitable, successful business went into a downward spiral that even he couldn't fix. Almost overnight his opportunity to retire with wealth and a stellar reputation became a nightmare that literally hospitalized him and made him a pitiful shadow of his former self. How sad that such a great opportunity to exit with dignity and security soured so quickly.
Why should entrepreneurs plan for their succession? Because it is their responsibility to do so and they are the only ones who can do it. Succession will happen in a business whether it is planned or not. In this case, lawyers, accountants and family members got involved, did triage and helped minimize the damage, but ultimately the owner still had to make tough decisions. He did it under duress and in ill health, rather than with forethought and a clear mind.
But if you don't deal with succession for your business, who do you think will? Some owners take the coward's way out and hope they die before they have to deal with succession. It's such a foreign, painful process, that they don't know where to start.
In my research, I've been interviewing a number of former business owners. When I asked how they felt just before selling, I heard, "terrified", "sweating bullets" and "scared to death" from individuals who had courageously built very successful businesses.
Oddly enough, when I asked how they felt afterward, I heard, "relief", "a tremendous weight off my shoulders" and "peace." In other words, the anxiety and fear was much worse than the real thing and ultimately the payoff was worth the effort. One owner confided that when he realized he could no longer get around the store and meet his customers and his staff without being pushed in a wheelchair, he knew it was time to make the transition. And having done it, he admitted he should have done it years earlier. He learned he really liked being retired.
Planning for succession is one of the most important things an owner can do for his/her business.
1. It puts in place a strategic plan for the next stage of the business.
2. It enables other leaders to step forward, grow, and take on more responsibility.
3. It increases the value of the business by replacing "Superman" with a team who can manage without the owner's dominant but potentially vulnerable contribution.
4. It can be fun and lead to a new and exciting chapter in the owner's life.
5. Loyal family members or leaders may be rewarded with more responsibility. It avoids having them leave because it is taking too long. (Think Prince Charles.)
6. It creates more stability in the business when employees know what to expect and how things will evolve.
7. It positions the business to be sold at the right time for the right price for the least taxes and minimal business disruption.
8. It enables the owner to set up a secure income outside the business that is not vulnerable to downturns or the diminished capacity of the leader.
In addition to all these benefits, it is the owner's responsibility to guide that process to its optimal conclusion for the benefit of all the stakeholders. Not to do so is foolish and irresponsible - not the legacy that any business owner wants to leave.
by: Wayne Vanwyck
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