Have you concluded on the proper “who” for your succession plan? Remember, companies become successful with outstanding unique abilities and over-the-top passion, and they die because they “just go through the motions.” A well-thought-out succession plan requires a successor whose unique ability fits the role of “New Boss.” Make a good selection.
Now you must tackle the “what” of your succession plan. What is the value of your business? From what I have seen, value comes from three core areas:
1) Hard Assets - These are the machines and tools and trucks.
2) Soft Assets - These are the accounts receivable and future cash flow from contracts.
3) Your Brand - This is the tough one. How established is your brand? Or do you have a commodity? Can your key employees leave you and open as a competitor across the street?
How much of the Brand is you? I have heard two different comments.
- “I could work well with the ‘old man,’ but this kid?”
- Also, “Maybe now that the ‘old man’ has retired we can move the company into the 21st century."
These are tough questions that need to be handled honestly. How do these elements fit your succession plan?
Remember, the founder is usually also the “rainmaker.” No matter how well the next owners fit, there will be some “recalculating” that needs to be done. Positions need to be evaluated for the new lineup. Make sure to account for this while developing your succession plan.
If there is value for each party, a transition can occur. All parties must be reasonable and patient and be prepared for the “potholes” that will occur as a succession plan commences.
Maintaining Value Outside the Business
I have always felt you need to develop “buckets of wealth” outside your business value. The primary platform here is the qualified plan. There are many planning tools here to help you maximize your wealth. A good Wealth Advisor will help you create a substantial bucket of capital while helping your company attract, retain, and reward good employees.
Are your other buckets of wealth being managed correctly so you can live your life well, even during a disruption?
Are the key people insured properly in case a death or disability interrupts the flow of business?
Are alternative buckets of wealth being developed so the next buyout can occur?
Consider these questions while discussing your succession plan with a Wealth Advisor.
Failing to plan is planning to fail.