Successful family and small-business owners need to address succession planning.
Too many of them have continued the dysfunctional behavior of burying their head in the sand for years regarding this critical issue.
What happens when owners of family and small businesses realize they must take action?
Many are totally unprepared and often have many misconceptions and feelings about succession planning that will affect their efforts.
Many family and small businesses will reach out to one or more advisers to guide them through succession planning.
When owners begin with the advisers, the misconceptions and emotions will emerge and be counterproductive at the start.
Therefore it is very important that the myths and misconceptions regarding succession planning be identified and addressed.
< FICTION: We have plenty of time to plan, and we can do it ourselves.
This probably is the biggest fiction and the most challenging factor related to family and small-business succession planning.
Owners need to spend time planning for succession while active in their business. Postponing increases the probability that planning will fail.
Poorly planned, ill-conceived and expensive succession planning will produce unfavorable and unfortunate results that may include significant financial losses and high levels of stress.
< TRUTH: Family and small-business owners must start succession planning early and seek outside advisers.
An early start – meaning years ahead rather than months ahead – is required.
Time is needed to develop the plan and timeline for succession. Professional assistance from outside advisers is essential to develop a sound, strategic plan.
< FICTION: The successor will be ready to take over when the owner is ready to leave.
Another major piece of fiction is that the selected successor will somehow miraculously be prepared to take charge without a well-conceived preparation plan.
< TRUTH: There must be a well thought-out plan of preparation for the successor.
Time for training and preparation for the successor could be lengthy, depending on the size of the organization and the complexity of its business structure.
It is important to remember that the owner must be directly involved in the preparation plan for the successor.
< FICTION: Giving up ownership means giving up control and a loss of income.
Family and small-business owners too often fear a succession plan will mean a lower income and giving up all control.
< TRUTH: A strategically structured succession plan can facilitate the transfer of business ownership without the owner losing control or income.
The plan could have the current owner still running the business and compensated accordingly.
The sooner family and small-business owners begin transferring ownership to a successor, the higher the probability for success, emotionally and financially.
< FICTION: There will be agreement and acceptance of the owner’s choice of successor.
Once family and small-business owners select their successors, there will be agreement with and acceptance of the choice throughout the business.
< TRUTH: Others in the business will think the choice is not good and/or not fair.
Family and small-business owners must realize that, whatever the plan, there may be difficult and uncomfortable issues related to the choice of successor. These issues need to be identified and addressed in the plan.
Many things can be guaranteed in a successful succession plan. However, happiness and harmony of all others in the business cannot be guaranteed.
< FICTION: Selling the business will be easier than developing and implementing a succession plan.
Owners of family and small businesses believe there will be many interested businesses and/or people wanting to buy their business at the price the owner believes is justified.
< TRUTH: The process and effort to find a buyer could be challenging and lengthy.
The process and time to market and sell a business is not simple and short. And timing is critical because it will influence the way the business will be valued.
Most family and small-business owners have an idea of the worth of their business based on revenues, fixed assets, profitability and balance-sheet items. The truth is that finding a qualified buyer for the business and reaching an agreed-upon price for the business are challenging and time-consuming.
Family and small-business owners need to learn the differences between the fictions and truths of succession planning, and plan accordingly to ensure a successful outcome.
And they need to learn it and act on it now.
Longtime contributor Glenn Ebersole is a strategic business development/marketing executive and leader. He can be reached at firstname.lastname@example.org or 717-575-8572.