Tax

Stop Worrying About Succession!

2015
Author:  Alan Taylor

Alan Taylor

Director

Audit

360 E. 8th Avenue, Suite 201
P.O. Box 1196
Bowling Green, KY 42102-1196 (42101)

Bowling Green
270.781.0111

Countless articles and studies have been written on succession planning. A large number of privately held companies expect a succession event in the near term but have done little to plan for it. How can such an important issue simply fall off the radar? Easy: During the day, ownership and management address day-to-day issues, but at night, these same individuals lose sleep over their lack of a thoughtful and developed succession plan.

My advice:  Stop worrying about succession!

There are two options. The first is to simply stop worrying about it. I might suggest finding a good psychologist to help you find a way to stop thinking about the following questions:

  • How much money do I need to support my retirement plans and family? Is my company positioned to meet this goal?
  • What happens to me, my family, my business and my employees if I’m suddenly unable to run the business? (Note:  If you decide to just run the business as long as you can, it’s not a question of if this will happen, but when.)
  • Who is my potential management successor, and is he or she getting the proper training?
  • What do I want to accomplish during succession, and which option helps me meet that goal?

The second option is to develop a succession plan that meets your goals and addresses contingencies, gaps and opportunities. After you’ve developed a succession plan, voila! You’ll stop worrying about succession.

If you elect Option 2—and I hope you do—I suggest identifying a lead advisor who can manage planning and implementation. This will help you efficiently use your time and develop a thoughtful and comprehensive plan. This advisor should have experience in succession planning and a solid understanding of the interplay between the business, you, your family and ownership. This advisor also should have a developed process and toolkit for navigating these relationships.

If you selected the right lead advisor, your process generally begins with discovery. During this phase, the advisor works with you to gather information, identify stakeholders and needs and clarify objectives. In the second phase—integrated planning—your advisor will work with you to compare your current state to your desired state and identify gaps, opportunities and risks, prioritize needs and develop a road map to meet family, business and ownership objectives. A critical component of succession planning is clarifying stakeholder objectives and reconciling differences when possible. Remember, the right advisor will readily seek assistance from other qualified advisors at various points in this process. The lead advisor won’t be an expert in all fields—if they claim to be, I would exercise extreme caution—but will be able to identify potential needs and access the right professionals.

The final phase of the process is implementing the plan you’ve developed. It’s critical for your lead advisor to be involved in this process. Note that some action plans developed in the first two phases may not be acted upon immediately. For example, if the first two phases identified the need to enhance your business’s value prior to a sale, at least two action plans may result. The first—the development and implementation of a business process improvement plan—should be acted upon immediately. The second—going through the process of selling the business—will come several years later.

One final admission: I’ve said that by developing a succession plan you’ll stop worrying about succession, but I may have exaggerated—succession planning is a never-ending process that requires re-evaluation as circumstances change. Succession planning likely will always be a concern (as it should be), but having a plan in place will hopefully give you the peace of mind to get a good night’s rest.



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