Business Succession: Keeping It In the Family
Years ago, I encountered a business owner who desperately wanted to pass his dealership on to his son. His plan, if you want to call it that, amounted to introducing the 18-year-old to employees as the person who would eventually become their boss. It did not go well. Long-time employees were naturally resentful of the boss’ kid who knew less than they did and refused to show him the ropes. The situation deteriorated until the son eventually left the company.
Not only did the succession from father to son fail, but hard feelings permanently damaged the relationship between the two. Both consequences could have been avoided with thoughtful planning. I learned that lesson the hard way, because I am the son.
Drawing on my personal experience has allowed me to help countless other families avoid pitfalls and successfully transition a business from one generation to the next. I have learned there are four key ingredients for keeping it in the family:
Writing a succession plan, for many, amounts to writing the final chapter that defines your life story. Instinctively, we know succession-planning means facing our mortality. That takes courage.
Successful transitions require a leader. Sometimes it isn’t the owner, but the successor who takes charge. Regardless, it is the leader, along with the advisory team, who creates the vision, secures buy-in from all stakeholders, and takes responsibility for implementing the plan. Most importantly, the leader will recognize when the plan is not working and pursue a more realistic course. That could mean selling or closing the business.
A TEAM OF ADVISORS
A business owner will only go through the succession process once in his or her lifetime. That’s why it’s important to use professionals to create a plan that is right for the business and the family. An ideal team of advisors should include:
• a business consultant who is experienced in succession/exit strategies and is well grounded in both business and family systems; a consultant’s job is to create a succession timeline with milestones and then manage, evaluate and troubleshoot the entire process
• a transactional attorney who specializes in estate and tax law to navigate multiple state and federal regulations
• an independent financial planner or CPA to make sure the financial vehicles needed are in place and the numbers work
Remember, changes are likely to occur over the years that will make the original plan unworkable. For example, business numbers can dramatically change for better or worse, or a key family member could develop a debilitating illness. A good back-up plan is not only good insurance; it also gives you peace of mind.
The owner of ProGro Inc., a management consulting firm, Dan Kohler has consulted internationally to the trades and other service businesses since 1997. A psychologist by training, Kohler’s focus is on the people side of the business equation. He has extensive experience in family business issues, team building, business communication, and management. He also teaches seminars in active listening, sales, and management training.