Mark’s three-part succession planning series will examine why a succession plan is important, questions business owners must ask themselves before planning, and elements of a succession plan.
Thinking about the life of your company after you is hard. We’d all like to believe that one day each of us will ride off into the sunset, confidently bestowing the sweat, sleepless nights and responsibility to a capable successor who will continue business as usual while we enjoy the financial dividends of our lifetime achievement. A clean, simple transition. Later. When you’re ready.
Leaders, it’s time to get real. Three in five small businesses do not have a succession plan in place and even large corporations have been known to operate on the ledge without an identifiable succession plan. Historically, successions have not been well done. The lack of preparation – for planned and unplanned circumstances – may account for a number of business stumbles and failures following transition.
Start the succession planning process now by first answering a few tough questions. Give yourself time to reflect on the past and visualize the future:
- How much money do you personally need for your own financial independence in retirement?
- Have you enlisted the help of a certified personal financial planner?
- At what age do you see yourself divesting from daily activities of the company?
- What does retirement look like for you and your family?
- Do you want to reward key employees for their support, loyalty and performance?
- Are there likely successors in place with the knowledge and capability to be leaders?
- Are they ready now, or do you need to cultivate their knowledge and capability further?
- Will you consider an external successor?
- Do you wish to preserve a family legacy?
- Have you enlisted the help of an attorney?
- What happens to the business in the event of your untimely death or disability?
- Who will fill the leadership void? Is their assignment temporary or permanent?
- Who will communicate with employees and “calm the storm”?
- Who will make financial decisions?
- Do you have a strong cash flow and balance sheet to maximize valuation?
- Have you enlisted the help of a certified public accountant?
- How is the value of the business determined?
- Have you enlisted the help of a certified business appraiser?
I’m an advocate for professional assistance from a certified financial planner, attorney, accountant and business appraiser. Professional expertise is critical to a successful transition plan. Once you’ve answered the questions above, you’re ready to enlist professionals and build the team that will lead you to a successful transition.
In the final installment of Mark’s three-part succession planning series, he will share the steps and key elements of an effective plan that maximizes financial independence for the business owner, and provides stability for the company.
Mark Schwei is an equity partner and member of Consolidated Construction’s executive team, which designed and implemented its own succession plan strategy. He is an engineering graduate of Marquette University and imparts his love of details, practicality and ingenuity on matters related to company leadership. Mark continued his executive education through the University of Wisconsin on the subjects of Business Planning, Mergers and Acquisitions, and Sales and Marketing Management, and received specific training in the area of succession planning from national experts. Mark is a leadership mentor and business coach to chief executives as current Chairperson at The Executive Connection (TEC).